Holidays are a time when families come together from near and far. For many people, though, the nearest family reunion is just a room away.
Having extended family or in-laws living with you might be tough in some ways, but it also might offer some tax benefits. Make sure you are making the most of the situation by claiming those tax deductions.
Did you know you may be able to claim your in-laws as a dependent? Look at each parent individually. You may be able to claim them if:
- Their taxable income is less than $3,900. Even though they may receive Social Security benefits, they may still be a dependent if their income is less than $3,900.
- You provide more than half their total support.
- AND you provide more than half the cost of maintaining the home.
Even better, they don’t even need to be under the same roof. If you are providing more than half the cost of their home somewhere else in the U.S. and their income is less than $3,900, you may still be able to claim them as a dependent and keep peace in your life! If you are paying their support, providing their home (either with you or somewhere else) and they are in the U.S., but their income is $3,900 or higher, you may still be able to claim any medical expenses you pay for them as a deduction.
No sibling rivalry needed
There is also an underused tax rule that allows adult children who share the support of a relative to alternate who claims the relative as a dependent. When two or more people are providing more than half the support of a family member, such as a parent, including providing a place to live and that relative has a taxable income of less than $3,900, the group of individuals may choose a different member of the supporting group to claim the dependent exemption each year.
Advice for suddenly not-so-empty nesters
And don’t forget those boomerang kids. Yes, if your child has moved back home, and their total income for the year is less than $3,900, you may be able to claim them as your dependent as long as you are paying more than half their support and half the cost of maintaining the home you are all living in. Unfortunately, the credits associated with young children (EITC and the Child Tax Credits) are not available for older children, but you can still claim the dependent exemption. While you are looking at the new make-up of your modern family, remember there may be some tax breaks associated with this new arrangement. Contact your local Tax Pro with any questions you may have about the possible tax breaks associated with aging parents and boomerang children.