Parent Payoff

If you help to support an elderly parent, you might be able to claim him or her as a dependent. In 2001, you get a $2,900 deduction for each dependent.

To qualify, your parent must be a U.S. citizen or a resident of North America and he or she can’t file a joint tax return. (You can claim a non-parent as a dependent if that person lives in your home.) Two other conditions must be met:

• Gross income. The dependent’s gross income must be below $2,900 in 2001. Generally, Social Security benefits, gifts, insurance proceeds, and tax-exempt interest won’t be included.
• Support. You must provide over half of what it costs your parent to live during the year. If your parent lives in your home, count the fair rental of the housing you provide as well as his or her share of household grocery bills.

Keep track of your parent’s expenses and see that you’re over the 50% mark. If it’s a close call, ask your parent not to spend personal funds on major expenses such as travel or auto repairs.