Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, November 22, 1993 TAG: 9311190405
SECTION: BUSINESS PAGE: A-8 EDITION: MOENY
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Medium
Squeezed by the cost of educating their children, they increasingly also are responsible for caring for their parents.
If you are supporting an elderly parent, however, the Virginia Society of Certified Public Accountants points out that certain tax breaks can help alleviate the financial pressures on you and your family.
These take the form of dependency exemptions, tax-filing status, tax credits and medical deductions.
Although taxpayers commonly take dependency exemptions for their children, the society said, many fail to realize they may claim an additional exemption on tax returns if they are providing at least half the support of parents or other close relatives.
They can do this as long as that relative does not file a joint return with his or her spouse.
With the exception of legally adopted children, qualified dependents must be citizens of the United States or residents of the United States, Canada or Mexico.
The dependency exemption, currently $2,350, directly reduces taxable income.
Individuals who qualify to file as head of household also are subject to a different tax rate, which is usually lower than the rate for single individuals.
You may file as head of household if you are unmarried or if you pay more than half the qualified costs of maintaining your home, and it is the principal place of abode for a qualified relative for more than half the year.
A qualified relative is a son, daughter, grandchild, adopted child or stepchild. In general, any other relative must qualify as a dependent. However, dependent parents may live elsewhere, if you maintain their household.
If you are married, you can qualify as head of household if your spouse was not a member of the household for the last six months of the year and if your home is the principal place of abode for a child for whom you are entitled to take a dependency exemption.
If your dependent parent is physically or mentally incapable of caring for himself or herself and you need someone to look after him or her while you work, you may be able to recover some of the cost by claiming a tax credit.
If your adjusted gross income is $10,000 or less, an income tax credit is available equal to 30 percent of certain employment-related expenses incurred for such care.
The amount of the credit will decrease by 1 percentage point for each $2,000 of adjusted gross income (or fraction thereof) in excess of $10,000 until it decreases to 20 percent for taxpayers with adjusted gross incomes over $28,000.
The maximum amount of employment-related expense that can be taken into account to determine the credit is $2,400 for one qualifying individual and $4,800 for two or more qualifying individuals.
Even with medical insurance coverage, many families are finding themselves sharing the burden of a parent's medical bills.
If you pay for your dependent parent's qualified medical expenses, you may take an itemized deduction to the extent that such expenses - along with your own medical expenses and those of your other dependents - exceed 7.5 percent of your adjusted gross income.
Qualified expenses include the cost of medical insurance premiums; fees paid to physicians, dentists, chiropractors and other medical professionals; prescription drugs; supplies; and equipment such as false teeth, eyeglasses, crutches, hearings aids or orthopedic shoes.
The CPAs point out that, as a caretaker of elderly parents, you should help them with a proper financial plan and encourage them to draw up appropriate legal documents, such as a will.
by CNB