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August 25, 2011
Financial Costs of Caring for Your Parents
Kudos to the millions of “sandwich-generation” Americans. These exhausted souls spend their time and money caring for and supporting not only their own children (and sometimes, grandchildren), but their parents as well. All while trying to advance their own careers and plan for the future.
No wonder so many people caught in this situation have trouble paying their bills and saving for retirement. If you are primary caregiver for one or both parents or are supporting them financially, here are a few ideas that may help you keep your own finances on track:
Claim parent as a dependent. You may be able to claim your parents as dependents for tax purposes if, among other things:
- You provide more than half of their financial support (food, lodging, medical expenses, clothing and other necessities). If they live in your home, you can count the fair-market rental value of their lodging, including utilities, in that calculation;
- Their gross income (excluding Social Security payments and other tax-exempt income), is less than $3,700 a year; and
- They did not file a joint tax return — unless it was to claim a refund.
The rules are complicated, so consult a tax professional or review IRS Publication 503 to see if you qualify.