In order to claim a parent or another elderly relative as a dependent on your tax return, several tests must be met. Among them: you must provide over half of what it costs for that person to live during the year.
This “support test” may be easier to pass if the would-be dependent lives in your house. If so, you can count the fair rental of the housing you provide.
Say your elderly mother lives with you this year. The cost of her food, clothing, transportation, recreation, health care, and similar necessities totals $4,000.
You also provide her with a room that you could rent to a third-party for $300 a month, or $3,600 a year. Thus, the total cost of her support is $7,600 in 2003: $4,000 plus $3,600.
You must provide over half of that $7,600, or at least $3,801. Because you have provided $3,600 worth of lodging, another $201 in support puts you over this threshold.
You should keep track of your parent’s expenses and see that you’re over the 50 percent mark. If it’s a close call, ask your parent not to spend personal funds on major expenses such as travel.
