Today TaxMama hears from Fran in Maryland with this concern. “I have a disabled sister. She is not my dependent and does not live with me. Some of my siblings and I would like to pool our money to pay for her in-home health care.
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Is there a way to make our contributions tax deductible?”
Dear Fran,
You sound like a terrific bunch of siblings. And smart, too.
Doing research on the cost of our mother’s care – in-home vs living in a nice senior home, we learned that it’s not only cheaper, it’s a lot more pleasant and dignified to keep her in her own residence. (We learned it would cost over $5,000 per month for a shared room in a kosher ‘facility’. Or over $7,500 for a private room. In contrast, it only costs about $4,000 for her to live at home in a spacious 3-bedroom, 2 bath apartment – and supplement Medicare’s coverages to get someone to help her regularly and drive her around periodically.)
This kind of financial pooling is becoming more and more necessary as insurance funds erode and families need to help disabled and elderly who need care.
Your question is about the tax benefits you might be able to derive?
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Well, if the money you all contribute, in total, is more than half the cost of your sister’s living expenses, she may qualify as someone’s dependent.
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There is a special provision in the Tax Code to allow for folks who pool their resources to help a family member. You can take turns claiming her as a dependent each year. The person who does claim your sister for the year must have contributed at least 10% of her total support for the year.
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Read the instructions to Form 2120 – Multiple Support Declaration
https://www.irs.gov/pub/irs-access/f2120_accessible.pdf
The form lets you allocate the dependency exemption and related rights to just one of you. You can file a new form each year. Each of your siblings will need to sign the form, releasing their claim for that year.
Perhaps our Tax Pros will have more ideas for you.
And remember, you can find answers to all kinds of questions about multiple support issues and other tax issues, free.
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Where? Where else? At TaxMama.com
- Ask TaxMama :: Where taxes are fun and answers are free
- www.TaxQuips.com :: The number ONE free tax podcast online
- IRS Form 2120 :: Multiple Support Declaration – when you share a dependent
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