Retired Military Finances 301: Is Mom (or Dad) Your Dependent?Taxes Tricare Veterans Benefits
Many of us are at that point where we’re helping out Mom and/or Dad. The help may range from helping to pay expenses to having Mom and/or Dad living with you. That support may qualify you for certain benefits.
You may be able to claim your parent(s) as a dependent on your tax return. Under the Tax Cuts and Jobs Act (TCJA) that may qualify you for the Other Dependent Credit (ODC). The ODC is worth $500 per parent. There are rules to be a dependent and qualify for the ODC. Here they are:
- Your parent(s) must be a qualifying relative - they are
- Your parent’s gross income must be less than $4,400 (2022). It is worth noting that if your parent’s only income is Social Security, there is a pretty good chance that Social Security will be excluded from gross income and he or she will not hit the threshold. If you’re helping both parents and they both receive Social Security, this is less likely. If Mom or Dad has a pension or other sources of significant income, he or she may not qualify as your dependent
- You must provide more than ½ of your parent’s total support for the year. This can be shared with siblings, but only one of you can claim the parent as a dependent (you must pay for at least 10% of the expenses)
Additionally, you may be able to claim medical expenses that you pay on behalf of your parent on your tax return. From a practical standpoint if you’re retired military and still working, it may be difficult to exceed the 7.5% of Adjusted Gross Income (AGI) threshold to deduct medical expenses.
Finally, if both you and your spouse are working, you may be able to claim the dependent care credit for the expenses you incur to be able to work. If your parent is not physically or mentally able to care for him or herself and lived with you for more than ½ of the year this credit could apply. Of note, this credit can still apply if your parent’s income was too high to qualify for the ODC (your parent still has to live with you for ½ the year though).
You may also be able to claim your parent(s) as a dependent with the VA. This will make you eligible for greater monthly VA disability payments. You need to be rated at least 30% disabled or on VA educational benefits and enrolled at least half-time in school.
The first step is to establish that your parent needs your help. This may be due to dementia, mobility issues, needing to live with you or needing financial support from you. Like the IRS, the VA has income limits, but they’re not clear-cut. However, if income is below $400 for one parent or $660 for both parents, they will automatically qualify. Unlike for taxes, Social Security income is included. If income exceeds these automatic thresholds, then the VA will look at expenses to determine if your parent(s) still qualify as a dependent.
Unlike with the ODC and other tax issues, the VA will also look at your parent’s “investment” assets (bank accounts, stocks, bonds and real estate). Personal assets like their residence and car, are not counted.
To claim your parent(s) as a dependent file the VA Form 21P-509
If your parent(s) qualify as your dependent, they may qualify for Tricare Plus (which only gets them access to treatment at a designated military hospital). It appears that this option is only available for Active Duty Servicemembers. Beyond access to a military hospital, Tricare Plus allows access to the base pharmacy.
It’s unlikely that these options will cover all the expenses involved in caring for your Mom or Dad. But they can help a little and are probably worth the time you spend to set them up.
Military Finances are Different
A financial advisor that doesn't specialize in working with Active and Retired Senior Military Officers and NCOs may be able to help you determine if Mom is a dependent for taxes. But he or she will likely not even know that the VA and Tricare benefits are an option. That is why we think you should work with a financial planner or advisor that deals with military financial and tax issues each and every day. If you'd like to chat with us about how we can help you with your military and veteran related financial benefits and issues in addition to helping you with the civilian side, use the button below to schedule a free initial consultation.
If you found this information useful, you might like the following blog posts:
If You Get the VA Funding Fee Refunded, Do You Pay Taxes on It?
Is the VA Going to Take Away my Rating for Sleep Apena?
Is VA Long-Term Care a Replacement for Long-Term Care Insurance?