Is Paying Bills for a Relative Tax Deductible?

Some expenses you pay for a relative may be deductible.

Some expenses you pay for a relative may be deductible.

If you pay certain bills for a relative such as your elderly parent or step-parent, you may be able to deduct some or all of these expenses from your taxes. Whether the costs are deductible depends on the type of expense, your relationship to your relative, and whether he provides more than half of his own support. The Internal Revenue Service allows you to take a tax deduction for anyone who meets the definition of a qualifying relative, and you may be able to deduct some of the expenses you pay for them, in addition to claiming them as a dependent.

Qualifying Relative

According to the IRS, a qualifying relative could be your child, step-child, foster-child, grandchild, niece or nephew. Grandparents, in-laws, brothers and sisters, and aunts and uncles also count as qualifying relatives. A qualifying relative doesn't have to live with you to claim him as a dependent, but his annual gross income must be less than $3,700, as of 2012. You also must provide more than 50 percent of his support for the year, alone or in combination with someone else.

Medical and Dental Expenses

If you pay medical and dental expenses for your qualifying relative, you can include these expenses with your own health care costs when figuring the medical expense deduction on your tax return. The IRS only allows you to deduct medical expenses equal to more than 7.5 percent of your adjusted gross income.

Mutual Support

If you and someone else work together to provide more than 50 percent of the support for your qualifying relative, you both can't claim the relative's expenses on your tax return. But you can draw up a mutual support agreement, in which you designate who will claim the relative's expenses in which years. Let's say you and your sibling contribute to your mother's support. As long as you each contribute more than 10 percent and the total exceeds 50 percent of your mother's support, you can take the deductions one year and your sibling can take them the next.

Care Expenses

The IRS allows a tax credit for child care and dependent care expenses. This is not a tax deduction but a straight tax credit that reduces your adjustable gross income. You may be eligible for this credit if you pay someone to look after your relative so you can hold a job. For example, if you pay a nurse, sitter or care aid to look after your elderly father-in-law while you work, you might be entitled to a tax credit of up to $3,000. If you have more expenses, you may be able to take the first $3,000 as a credit and the remainder as medical expenses, depending on the type of care you're paying for.

 

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