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Home >> Estate Planning Articles >> Tax Breaks for the Sandwich Generation

Tax Breaks for the Sandwich Generation

May 31, 2012 by Robert Kulas.

Compliments of Our Law Firm,
By: The American Academy of Estate Planning Attorneys

As our population ages, many of us find ourselves in a role we never quite anticipated: we’re serving as caregivers for our elderly parents while still raising children of our own. The emotional burden is one that most of us accept with grace and love. The financial challenges, on the other hand, can be a little harder to overcome. That’s why it’s important to know when you can claim your aging or ill parent as a dependent for income tax purposes.

50 Percent: The Magic Number

If, during the tax year in question, you provided more than one-half of your parent’s support  for food, shelter, medical care, and clothing, then your mom or dad is your dependent in the eyes of the IRS. Keep in mind that expenses covered by insurance, Medicaid, and Medicare benefits do not count.

Here’s an example:

Your father lives in your home. You pay the mortgage and utilities and provide all of his food and transportation. If you added it up, the value of this would come to about $800 per month, or $9,600 per year. He gets Medicare benefits of $4,000, which aren’t  enough to cover his annual medical expenses of about $7,000. He also receives $600 in Social Security benefits each month for an annual total of $7,200. He uses his Social Security to cover his remaining medical bills, pay for clothing, buy gifts for the grandkids, and take care of other miscellaneous expenses. All told, your dad’s expenses add up to about $16,600 per year, of which you cover approximately 58%. This means that your father qualifies as your dependent.

Exception to the 50 Percent Rule

If you do not provide more than 50% of your parent’s support, all is not lost. You might still be able to claim your mom or dad as your dependent if all of the following are true:

  • You provide at least 10% of your parent’s support.
  • You and others besides your parent provide more than 50% of your parent’s support.
  • No one person provides more than 50% of your parent’s support.
  • Every other person who contributed more than 10% to your parent’s support waives the right to claim your parent as a dependent by signing Form 2120.
  • You attach each applicable Form 2120 to your tax return.

The Benefits of Claiming Your Parent as a Dependent

The ability to claim your parent as a dependent opens up a number of tax breaks. Perhaps the most valuable is the opportunity to deduct your parent’s medical expenses.

Provided your mom or dad qualified as your dependent on the date the services were performed or the date they were paid for, you can treat any medical bills incurred by your parent the same as medical bills incurred by you, your spouse, or your children. So, assuming you itemize your deductions and your family’s total medical expenses exceed 7.5% of your income, you can claim a deduction for your family’s medical bills – including those incurred by your mom or dad to the extent those expenses exceed 7.5% of adjusted gross income.

Even if you can’t take advantage of the medical deduction, you may be able to claim a dependent care deduction if both of the following are true:

  1. Your parent lives with you.
  2. Your parent cannot care for him or herself.

Last but not least, if your mom or dad does not claim a personal exemption for him- or herself, you can claim your parent’s personal exemption.

While all of these tax breaks help to ease the financial burden that can accompany caring for your aging parent, the best way to lighten your financial load is to plan ahead. Long-term care insurance, Medicaid planning, and other estate planning tools can make your parents’ twilight years easier for your whole family.

An experienced estate planning attorney can help you and your parents plan ahead for the financial concerns that aging brings, so that you can focus on enjoying every moment you have together.

Kulas & Crawford

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I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

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Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

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Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family.

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"Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family."

Janice M
Client Review
August 25, 2020
    

Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

Krissy L.
Client Review
August 25, 2020
    

I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

Leo C.
Client Review
August 25, 2020
    

Mr. Kulas and his staff have been extremely helpful & knowledgeable for the over 3 years we have been associated. They are easy to talk to and explain everything without feeling rushed. Very competent and professional.

Mildred W.
Client Review
August 25, 2020
    

I have known Robert Kulas for 20 years since I was co-executor for friends who had Mr. Kulas prepare a Trust for them. When I felt I needed a trust also, I came to him. I have always been completed satisfied with his work and that of his charming, competent staff.

Joan C.
Client Review
August 25, 2020
    

We began our estate plan process in 2004 (12 years ago) and have been pleased with the periodic reviews we have gone through and when changes have been needed the firm has been thorough and professional in making those changes.

L.G.K.
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