TAX TIP No. 7
Tax help in caring for your aging parent
Sometimes you don't have to shoulder the load alone.
Many adult children get help from siblings in caring
for mom and dad.
Not only does this help maintain your
day-to-day bank balance, it also spreads out any tax
breaks. Where none of you solely pays for half of a
parent's support, but each contributes at least 10 percent
toward parental care, take a look at the IRS's multiple-support
declaration. This form helps you account for the tax
implications of a shared-care arrangement.
Roth offers this example: Mom is in a
nursing home. Her Social Security covers 40 percent
of the facility's costs, and you and your two brothers
split the remainder, each paying 20 percent. Because more
than half of her support comes from her three kids,
she can be claimed as a dependent -- but by only one
of you. That choice is left to you and your brothers.
After you and
your brothers agree that you
can claim Mom as a dependent
this tax year, file Form
2120, Multiple Support Declaration with your tax return. This
form indicates that while
several siblings contributed
to mom's support, the others
waive any tax-exemption claim.
You also need to get signed statements
from your brothers acknowledging they waived their
tax claims. You don't have to send these documents with
your 1040, but keep them in your records in case the
IRS ever questions your exemption or medical deduction
And the best news about a multiple support
agreement is that it's not permanent.
"You can rotate it around from tax
year to tax year," says Roth. "The next year,
another sibling takes the responsibility and the third
brother the next year. It softens the blow, but it's
not going to cover all that it's going to cost you."
first, then look for tax breaks
Because of the staggering
(and ever-increasing) costs,
Roth emphasizes that families
need to preplan for parental
care and the associated tax
This is especially important when a multiple-support
agreement is utilized. Make sure the year you claim
Mom as a dependent, you, not your siblings, pay her
medical costs so that you get the full tax-deduction
benefit. Any medical payments a sibling makes, while
helpful, will do neither of you any tax good.
really isn't a lot out there
for this sandwich generation,"
says Roth. "However,
as this group grows, so, too,
will their political clout
along with tax relief in the
area of help for aging-parent
breaks won't substitute for
good financial planning. It's
one of the hardest things
that children have to do because
it deals with finances, but
you need to sit down with
your parents and siblings
and make a plan.
"For years and years these people
have taken care of you. Now that is shifting."
Updated: Jan. 13, 2009