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Good TAX Info: How Claiming an Older Adult as a Dependent Affects Your Taxes

There are several financial advantages that accompany being able to claim a dependent on a federal income tax return:
Reducing the caregiver's taxable income: The most well-known way that claiming an older adult can impact taxes is by reducing the total amount of a person's taxable income. For the 2015 tax year, each dependent reduces a taxpayer's taxable income by $4,000.
Unmarried caregivers can file as "head of household:" Caregivers who would otherwise have to file as "single" may qualify as "head of household" if they can claim an older adult as a dependent on their tax return. This will enable them to access a more generous tax rate schedule (which determines their income tax bracket) and help them take advantage of a higher standard deduction amount of $9,250 for 2015.
Claiming the Child and Dependent Care Credit: This credit was created to benefit people who hire a home health aide to care for a dependent so that they (the taxpayer) can continue to hold down a job. The amount of the credit is calculated as a percentage of the taxpayer's work-related expenses, and is limited to either $3,000 (if the taxpayer is only claiming a single dependent) or $6,000 (if the caregiver is claiming two or more dependents). Examples of elder care expenses that can be included for the purpose of calculating the Child and Dependent Care Credit are: housekeeping and cooking services (as long as they are necessary for the safety and protection of the older adult), hiring a home health aide, and services provided at an adult day care center.
Deducting medical and dental expenses: A person who chooses to itemize their deductions can claim the medical and dental expenses of their qualifying dependents (in addition to their own). However, these expenses must add up to at least 10 percent (if the taxpayer is younger than 65), or 7.5 percent (if the taxpayer is 65 or older) of their adjusted gross income. The list of deductible medical expenses is extensive, but includes items such as Medicare Part D premiums, hearing aids, bandages, eye surgery and hospital service fees.
Things to keep in mind when claiming a dependent
A spouse can never be a dependent: Married couples typically file a joint tax return, which is accompanied by an exemption amount that takes into account the fact that two people are filing a single return.
An older adult can only be claimed as a dependent on one tax return: In some families, multiple people will provide some financial support for a dependent that would qualify them to claim that person. However, only one taxpayer can claim a particular dependent in a given year. If more than one person contributed a significant amount towards the older adult's care, then the supporters must agree on who will claim the deduction for that year. Each supporter must sign and date a statement that waves their right to claim and present that statement to the taxpayer who will be claiming the older adult. That claimer must then fill out a Form 2120: Multiple Support Declaration verifying that they have received the signed statement from each supporter.