WASHINGTON ? Members of the sandwich generation ? caught between supporting elderly parents whose assets are nearly exhausted and adult children without jobs ? might find some relief come tax?time.
The bottom line is, who?s a dependent? Your kindergarten-age son, your adult daughter, her grandparents, or maybe an elderly uncle or?aunt?
?There?s a changing family dynamic because of the economy,? said Bob Meighan, vice president of TurboTax, an online tax preparation?service.
More people are living longer. According to the U.S. Census Bureau, the number of older Americans increased by 9.7 percent from 2000 to 2010, when??
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WASHINGTON ? Members of the sandwich generation ? caught between supporting elderly parents whose assets are nearly exhausted and adult children without jobs ? might find some relief come tax?time.
The bottom line is, who?s a dependent? Your kindergarten-age son, your adult daughter, her grandparents, or maybe an elderly uncle or?aunt?
?There?s a changing family dynamic because of the economy,? said Bob Meighan, vice president of TurboTax, an online tax preparation?service.
More people are living longer. According to the U.S. Census Bureau, the number of older Americans increased by 9.7 percent from 2000 to 2010, when there were about 40 million people age 65 or older. A longer life span puts added strain on retirement accounts, which have already taken a hit in the roller-coaster?economy.
As a result, many baby boomers find themselves supporting their elderly parents, in some cases footing the bill for assisted living or nursing home?care.
Meanwhile, the unemployment rate for young adults age 20 to 24 was 13.7 percent in December, considerably higher than the overall rate of 7.8?percent.
Unable to find work, many young adults are returning home ? or never leaving, relying on mom and dad for food, lodging and?more.
What does this mean for?taxes?
?A lot of filers are going to have to pay particular attention,? Meighan?said.
More people may rely on tax software to help get them through the dependency?issue.
Depending on the individual circumstances, a taxpayer may be able to claim both their parents and their children as?dependents.
?The rules are very pro-taxpayer,? said Mark Steber, chief tax officer at Jackson-Hewitt Tax?Services.
If you are taking care of someone and the IRS defines that clearly ? age, income, residency tests and support ? you should be able to claim the exemption, he?says.
It comes down to the definition of?dependent.
The Internal Revenue Service makes a distinction between a qualifying child and a qualifying?relative.
To be a qualifying child, the person would have to be a child, stepchild, foster child or sibling, and under the age of 19, or 24 if in college, who has lived with you for at least half the year. The taxpayer would have to provide at least half the?support.
A qualifying relative can be a child who doesn?t meet the qualifying child requirement, a parent or stepparent, grandparent, niece or nephew, aunt or uncle or in-laws, according to the IRS. They do not necessarily have to live with you, but you do have to provide at least half the support for that person. And that person?s income cannot exceed the personal exemption ? $3,800 in?2012.
?Unlike a qualifying child, a qualifying relative can be any age,? the IRS says in its Publication?17.
Taxpayers can take an exemption of $3,800 for each qualified child or relative who is a?dependent.
Here are some examples from the?IRS:
?Your mother received $2,400 in Social Security benefits and $300 in interest. She paid $2,000 for lodging and $400 for?recreation.?
If you spend more than $2,400 to support her, supplementing what she spends, and her annual income is less than $3,800, you can claim her as a dependent and take the full value of the?exemption.
?Your brother?s daughter takes out a student loan of $2,500 and uses it to pay her college tuition. She is personally responsible for the loan. You provide $2,000 toward her total support. You cannot claim an exemption for her because you provide less than half of her?support.?
Usually the items that go into determining support are the cost of housing, food, clothing and medical costs, including doctor bills and?medicine
But it?s not just the personal exemption that could help taxpayers. Individual taxpayers might qualify and get the ?extra benefit? of filing as head of households if they legally can claim children, parents or relatives as a dependent, said Jackie Perlman, principal tax research analyst for H&R Block?.
Steber said taxpayers have to understand that it?s not just nuclear family members who might qualify. Think beyond children and parents. If you?re providing half the support for an aunt or uncle, niece or nephew, whose income for the year was under $3,800 you may be able to claim them as?dependents.
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Source: http://www.spokesman.com/stories/2013/feb/18/incoming-relief/
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