Claiming Elderly Dependents

• The requirements for claiming exemptions for elderly dependents are different depending on your relationship with them. If they are family members, such as your mother, father, uncle or sibling, the IRS doesn't require that they live in your home. Elderly individuals who are not related must live with you for the entire tax year. However, the elderly person is only eligible to be your dependent if they earn less than $3,650 of income that is taxable. For example, if the person collects Social Security as their sole source of income, that income is tax-exempt regardless of the amount and is not included in the $3,650 threshold.
  
  

Taking Medical Deductions

• Once you determine that the elderly person can serve as your tax dependent, you can start including their medical expenses in your medical deductions if you pay for their doctor visits, insurance premiums, medical equipment, prescription drugs and essentially any other medical expense that is necessary. However, you will not save any money in taxes for these medical expenses unless you elect to itemize your deductions instead of claiming the standard deduction. Furthermore, the IRS only allows you to deduct the expenses that exceed 7.5 percent of your adjusted gross income.
  
  

Elderly Care Credits

• Another benefit of claiming elderly dependents is that you can qualify to claim the tax credit for your dependent care expenses. This credit offers a dollar-for-dollar reduction of your federal income tax liability for some of the costs you incur in hiring someone to care for your dependent while you are at work or searching for a job. The last requirement is that you earn income during the year from sources other than investments. This not only includes the salary you earn from a job, but the money you earn by providing services as a contractor or from a business you operate as a sole proprietor.
  
  

Volunteering Your Time

• There are times when you can claim a charitable deduction for some of the out-of-pockets costs you incur when volunteering your time at a charitable organization to take care of the elderly. The IRS doesn't allow you to claim a deduction for the value of your time; rather, the charity deduction only covers your incidental expenses. For example, if the organization you volunteer for requires that you purchase a uniform, you can deduct the price of the uniform and the cost to have it cleaned periodically. You can also claim the cost of gas and oil you consume driving back and forth to the organization or if you use a personal vehicle to take an elderly person out for the day.