Elderly Dependent Requirements

• In addition to the exemption you can take for claiming an elderly person as your dependent, the Internal Revenue Service requires it before you can claim any other credit or deduction for the home-care assistance costs. To claim an elderly person as your dependent, it's not necessary that she live with you if you have a familial relationship with her. If not a relative, the elderly person must live with you for the entire tax year. In addition, the elderly person cannot receive $3,650 or more of taxable income and you must provide more than half her financial support during the year, which includes any cost you incur for home-care assistance. If you satisfy these requirements, you can reduce your taxable income with an extra exemption and may qualify for other tax benefits.
  
  

Medical Expense Deduction

• An elderly taxpayer or the person claiming her as a dependent can take some of the home-care assistance costs as a medical deduction. To do so, the home-care aide must be a qualified nurse. If the nurse also provides other services, such as grocery shopping and house cleaning, you must allocate your annual expense between deductible nursing services and nondeductible household services. To claim any medical deduction, you must elect to itemize your deductions. Moreover, the total of all your medical expenses are only deductible to the extent it exceeds 7.5 percent of your adjusted gross income.
  
  

Credit for Elderly

• The tax credit for the elderly and disabled can reduce the tax bill of only the elderly person, not the taxpayer who claims them as a dependent. The credit offers a dollar-for-dollar reduction of your tax bill at the end of the year by the amount of credit you qualify to claim. To qualify for the credit, you must be 65 or older by the last day of the tax year or under 65 and permanently and totally disabled while receiving taxable disability income. For example, if you receive tax-exempt disability from Social Security, you will not satisfy the requirements when under 65.
  
  

Dependent Care Credit

• As the taxpayer who claims the elderly person as a dependent, you will qualify to claim a tax credit for the dependent care expenses you pay, such as home-care assistance for your elderly dependent. To qualify for the credit, your reason for hiring a home-care worker must be so you can work during the day or look for work. In addition, you must have income that you earn during the tax year. This will include your earnings from employment, for providing services as an independent contractor or operating a business. It does not include the investment income you earn, such as rental income or interest from a bank account.