If you help care for an elderly parent or grandparent, you may be able to take a dependency exemption if you meet certain tests.

Does your relative have to live with you to qualify?

No, your parent or grandparent does not need to live with you to qualify as a dependent.

Income requirement

Your relative’s income from taxable sources for 2016 must be less than $4,050 in order for you to be able to take the dependency exemption. Also, you must show that you provided more than half of the person’s total support for the year.

Other requirements

1. The person must be a full-time member of your household or on the list of “relatives who do not have to live with you” in Publication 501.
2. He or she must hold citizenship or be a resident of the U.S. or a resident of Canada or Mexico.
3. He or she must not have filed a joint income tax return with anyone else.

Are the rules for the dependent care credit the same?

The child and dependent care credit is available if you paid expenses for the care of a qualifying individual in order for you to be able to work. The rules to qualify for the credit are more stringent than the dependency exemption.

The $4,050 income test doesn’t apply to this credit, but your relative needs to have lived with you for more than six months during the year and be unable to care for him or herself. Check out our blog for more requirements.

A lot of families run into situations where they need to provide care for their elderly loved ones. While a tax deduction certainly isn’t the reason you provide this care, it can help lessen the financial burden you might be facing as a result. If you’re unsure about your eligibility for either the exemption or the dependent care credit, do not hesitate to call a member of our Tax Services Team.