The Internal Revenue Service doesn't always deserve its bad rap. Sometimes the tax code can actually help the average person. The head of household filing status allows unmarried taxpayers with dependents to claim a higher standard deduction, thus lowering taxable income. In many cases, your parent qualifies as a dependent and makes you eligible not only for head of household status, but possibly other tax breaks.
Head of Household
There are three requirements for head of household status: you must be unmarried on December 31 of the tax year; you must pay more than half the expenses of maintaining your home; and you must have a dependent or other qualifying person living with you for at least half the year. There is an exception when you take care of a parent, and he does not have to live in your home. However, you must pay at least half of your parent's household expenses wherever he lives. Household expenses include rent or mortgage payments, utilities, food consumed at home, repairs and property taxes.
Your parent must also meet several requirements to be considered a dependent: he cannot claim himself on his own tax return; he cannot earn more than $3,700 (as of 2011); and you must pay more than half the parent's support, as well as more than half of his household expenses if he does not live in your home. Government benefits, including Social Secuity, are excluded from the income restriction, but a private pension is considered income.
The head of household filing status gives you several different tax breaks. First, your standard deduction is higher. For 2011 it was $8,500, compared to $5,800 for single taxpayers. You also get an additional exemption for your dependent parent of $3,700. Right away you've reduced your taxable income by $6,400 more than if you would otherwise file as single. And your tax rate is lower for head of household than for single status. If you pay medical bills for your dependent parent, you can deduct any unreimbursed expenses when you itemize your deductions. This includes insurance premiums, doctor visits, medical mileage, prescriptions and co-pays.
Dependent Care Credit
Even with a head of household filing, you may find you qualify for additional tax benefits. Even if you are the primary caregiver for your parent, you may also be eligible for a credit if you pay any other dependent care expenses when you are unable to be with him while you are at work or looking for work. The Child and Dependent Care Tax Credit is worth up to $3,000, depending on your income level, as a dollar-for-dollar reduction in tax liability. File Form 2441 (Child and Dependent Care Expenses) to claim the credit.
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