Can You Claim Your Parents as Dependents for Health Insurance and Tax Purposes?

Written by James Hirby | Fact checked by The Law Dictionary staff |  

There are plenty of situations in which you might wish to claim your aging parents as dependents on both your tax return and health insurance policy. If your parents are like most elderly folks, their medical expenses and living costs are rising far faster than their fixed incomes. Over the past decade, healthcare inflation has outpaced broader consumer-goods inflation by at least 100 percent and may accelerate further in the coming years. With co-pays for typical prescription drugs rising at alarming rates, it may be only a matter of time before your parents become unable to afford the medical care that keeps them healthy.

Fortunately, you might be able to include your parents on your employer-sponsored healthcare plan. First, you'll need to ensure that you can claim them as dependents on your tax return. They'll need to meet several criteria in order for this to be possible.

In order to qualify as your dependents, your parents will collectively need to make less than about $9,000 per year. This cutoff amount increases slowly with each passing tax year. The one exception to this rule concerns Social Security receipts: If your parents are active recipients of Social Security payments, they may still qualify as your dependents despite making more than $9,000 per year.

In addition, your parents will need to file their taxes as single filers. If they have to file their tax return as a married couple for any reason, it's unlikely that you'll be able to claim them as dependents.

They must also receive at least half of their combined income in the form of direct support from you. This support might include mortgage payments, medical co-pays and direct cash outlays. When you calculate exactly what proportion of their total income comes as "direct support," be sure to take into account any ongoing receipts from interest-bearing accounts, stock dividends and annuity disbursements. In most cases, parents that have significant cash reserves, traditional investments or pension plans will not qualify as dependents.

Your parents don't necessarily have to live with you in order to be claimed as dependents on your tax return. In fact, you don't have to see them at all. They simply must meet all of the requirements necessary to be considered dependent on your support. Nevertheless, you'll need to check with your employer's group health insurance provider before claiming them as dependents on your health insurance policy. Failure to do so could constitute insurance fraud.

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