Can I claim my parents as dependents for health insurance and tax purposes?

Written by DanielleBosely MS, NCSP | Fact checked by Psychology Dictionary staff 

Right off the bat, most people would assume the answer to this question is no. In reality, many adult children end up taking care of their aging parents. In fact, close to 30% of adult children are the primary caretakers of their parents. Thus, it makes this question a viable one every year when tax season rolls around. Taxes aren’t the only issue though. With the Affordable Care Act being instated in 2012, it’s a common concern whether parents of adults are considered dependents, because it can help those adult caretakers save money on their health insurance premiums. All that being said, the answer to this question is never cut and dry. Parents are considered tax dependents in some cases while not in others. For example,

It can be easy to get hung-up on technicalities, like whether or not your parents have to live with you in order to claim them as dependents. The short answer? No, they don’t have to live with you. As long as you’re providing a substantial amount of financial assistance to them, generally, the majority of their income, then they can live anywhere. That being said, many parents do live with their adult children and as long as more than half of their support comes from their children, then they can be claimed as tax dependents. This isn’t the only rule on this though.

The parent’s individual income cannot exceed the dependency threshold. That being said, the threshold is low, so low that many claim it wouldn’t be possible to survive on it without some form of assistance. So, this rule usually isn’t a problem for most people. Working parents usually tend to make too much to qualify as tax dependents for their children. However, parents who collect social security have an added advantage of reaping the benefits of that income while it doesn’t count toward the dependency threshold amount. Moving forward, your parents cannot be your tax dependent if they file their own income taxes together. They must both file as single taxpayers or they’ll be exempt. If you do claim them on your taxes, you would file as head of household.

When it comes to health insurance, the rules can be just as murky. If you want to add your aging parents to your health insurance policy, you might have to jump through a few hoops. Parents must already be listed as dependents with the IRS on your taxes and again, they must have made less than the dependency threshold in the previous tax year, and you must have provided more than half of their financial support. There are a few health insurance plans out there that allow aging parents as dependents, such as Tricare and Bank of America, but they aren’t common. Why? Well, anyone over the age of 65 is eligible for health insurance coverage through Medicaid. So adding them to your plan is generally a moot point.

 

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