Can I claim my elderly parents as dependants if I support them? Their combined income per year is <$4000. They file taxes jointly as self-employed. Implications?

[sratnam91]

My dad's 65 , mom is late 50's. They are US permanent residents. Currently, my dad joint-files their taxes

[pk]

@sratnam91  are your parents ( Green Card holders ) actually living with you or on their own?  Citizen of which country  ( because I need to know if the monies that your parents earn yearly is from a pension for abroad or are they actually working-- self-employed ?  taking care of children  or what  ) ?  Are you a US citizen/Resident ( Green Card )/ Resident for tax purposes or ?

AS you know under the current law there is zero exemption for dependents -- however there may be advantage  on health insurance -- is that what you are trying to do ?

Namaste

pk

[Anonymous]

assuming you are a resident alien or citizen.  your parents have to be a US citizen or national or resident alien,.

as qualifying relatives, you can't claim them if they file a joint return.

being your parents they do not have to live with you

if no joint return is filed each much have gross income of less than $4250. gross income does not include exempt income.

you must provide over 50% of support for anyone you claim 

[Hal_Al]

There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit and student status test, a relationship test and a residence test.  The Other dependent (qualifying relative) credit is worth (up to) $500 per dependent and is non-refundable.  That is, it can only be used to reduce an actual tax liability.

A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year  
2. His/her gross taxable income for the year must be less than $4200. For the self employed, gross income is the amount received, before expense deductions.
3. The taxpayer must have provided more than 1/2 his support
4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer

[Opus 17]

Couple of additional points.

1. For the gross income test, some expenses are subtracted to determine if the gross income is more or less than $4250.  It depends on the type of work and the kind of expense.  See publication 501 page 18.

2. If you claim your parents as dependents, you would get a $500 tax credit per person, plus you can deduct medical expenses that you paid.  You don't get a stimulus payment for them under the current law.  There has been discussion of a second stimulus with different rules but nothing has been passed by Congress yet.

3. If you can't claim your parents as dependents due to the gross income test or the joint tax return test, but you still provide more than half the total support, you can still deduct medical expenses that you paid for them even though they are not tax dependents.  See publication 502 page 3. https://www.irs.gov/pub/irs-pdf/p502.pdf