You can gain substantial tax savings if you claim your parents as dependents, but it’s not easy to do. You have to meet these tests:

  • a. The dependents must be a U.S. citizen or a resident of Canada or Mexico.

  • b. The dependents must not file a joint return with a spouse. Generally, this means it’s more likely you’ll be able to claim a widowed of divorced parent as a dependent. In certain circumstances, though married parents might file separate returns if you can claim one as a dependent.

  • c. The dependent must have less than $2700 in gross income(in 1998). This does not include untaxed Social Security benefits or tax-exempt income.

  • d. You must provide over half of the dependent’s support. In essence, “support” means what it cost a person to live during the year. If you contributed over half that amount, you can claim him or her as a dependent.