Claiming a parent as a dependent can make you eligible for the following tax credits and deductions.
Child and Dependent Care Credit
The Child and Dependent Care Credit is available to taxpayers who paid someone to care for their elderly dependent while they worked.
To claim this credit, you must have earned income during the year and include the care provider’s information (EIN or SSN, name, address) on your tax return.
This credit is worth anywhere from 20-35% of qualified expenses, depending on your income level. The maximum amount of qualified expenses you can claim for 2023 is $3,000 for one qualifying dependent parent or $6,000 for two or more qualifying dependents.
Credit for Other Dependents
Your dependent parent(s) may not qualify for the Child Tax Credit (CTC), but you may be able to claim the Credit for Other Dependents. You can claim this credit along with the Child and Dependent Care Credit.
The maximum credit amount is $500 for each qualifying dependent of any age as long as they meet the following requirements:
1. You claim the person as a dependent on your tax return
2. The dependent does not qualify for the CTC or Additional Child Tax Credit
3. The dependent parent is a U.S. citizen, a national, or a resident alien with either a Social Security number or individual taxpayer identification number (ITIN).
This credit starts to phase out once your income exceeds $400,000 for joint filers or $200,000 for all other filers.
Tax deduction for medical and dental expenses:
If you itemize your deductions, you can deduct medical and dental expenses for a dependent parent. Any unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible.
For example, say your AGI for the tax year is $100,000, and you spent $10,000 in medical expenses for your elderly parent. You would calculate 7.5% of your AGI ($7,500 in this case) and subtract that number from your total medical expenses ($10,000 – $7,500). The number you’re left with is what’s deductible on your tax return — in this example, you would be left with a $2,500 tax deduction.
Dependent care benefits from your employer:
Your employer may offer additional benefits such as a dependent care flexible spending account, which you could use to cover the cost of care for elderly dependents. The money you contribute to these accounts is tax-free, so you will not have to pay income taxes on it.
Does claiming a parent as a dependent affect their SSI or SS benefits?
You can claim a parent as a dependent without affecting their Social Security benefits or Supplemental Security Income (SSI). Just make sure your parent meets the qualifying relative tests.