For 2015, you can claim an exemption of $4,000 for a parent only if he or she has reportable income below $4,000. Suppose your mother's income is below $4,000. Then she doesn't have to count Social Security benefits as reportable income.
But even when her income is below the cut-off, there's another hurdle. Usually, you must provide more than half of mom's total support.
Any money mom spends on her own support counts as part of her total support. This holds true even when the money comes from untaxed sources, like Social Security, inheritances, or life-insurance proceeds, that needn't be counted toward her income ceiling.
But you have to count only money that she actually spends for her support, not money available to be spent. So when she receives untaxed funds, it may be necessary to check well before the end of 2015 on whether you furnish more than half her support.
Make sure that any money you contribute is allocated to support items like food, shelter, clothing, recreation, and medical care. Mom should, where possible, save tax-free funds or earmark them for nonsupport items, like gifts for grandchildren, rather than spend them on herself.
There's a last-minute maneuver that can help if her support contributions appear to be outpacing yours as the year nears its end. In calculating what you spend on support during the year, include the cost of items that you provide by Dec. 31, even though you hold off paying for them until next year â say, a Christmas gift that you pay for with a check sent in January.
The tax code authorizes an exception to the more-than-half requirement for siblings who share the expenses of supporting a parent. A multiple support agreement allows one of them to claim the exemption even though no one contributor provides more than half. The children can take turns claiming it, with Form 2120, Multiple Support Declaration.
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes...