Moving aging parents into your home

How to handle renovations, taxes, and dealing with your sibs

Published: July 2015
Wendy (left) and Joan Wintman have a family history of generations living together.

A year ago, Wendy and Don Wintman received a tearful call from Don’s mother, Joan. She had lived alone in her Florida home since the death of her husband a decade earlier. But after some minor falls, she reluctantly concluded that it was time to make a move.

“We knew the direction the situation was headed,” Wendy recalls, “My husband Don, our two children, and I had already decided we would add an addition so she could live with us.” Wendy, 58, works for Consumer Reports, just down the hall from the Money Adviser staff.

Joan, 89, moved into the house in Rockland County, N.Y., last November. She spent about $135,000 on a first-floor bedroom, kitchen, and bath; Wendy and Don paid $90,000 to cover, in part, more bedroom, bath, and closet space upstairs for the rest of the family. Joan has her own entrance, and there’s a door that can be closed to separate her space from the rest of the house. But it’s usually left open so that everyone, including the family’s two dogs, can visit. “We’ve always been a close family, but I haven’t received so many hugs and kisses in years,” Joan says. “I just love living here.”

As our parents get older, many of us consider letting them move in with us. But the financial ramifications–including remodeling costs, reduced income, and the tax consequences–are often greater than people anticipate, says Bradley Frigon, an estate-planning attorney in Englewood, Colo. Here are some factors to consider before you extend an invitation:

Home-remodeling needs

If your house or apartment is too small to accommodate a parent, one option is to add space, like the Wintmans did. But the cost can be substantial: A master-suite addition costs $111,245 on average, according to Remodeling magazine’s 2015 Cost vs. Value Report. Even if a major renovation isn’t required, you might need to make changes. For example, doorways should be 36 inches wide to accommodate a wheelchair or walker. Widening them can cost $500 to $5,000, depending on construction needs, says Bill Owens, a builder in Columbus, Ohio, who is a certified aging-in-place specialist, a designation given by the National Association of Home Builders. Or you can install swing-clear hinges, which allow doors to open entirely out of the door frame. Each hinge costs about $20 to $100.

An occupational therapist can assess the way your parent does everyday tasks to recommend renovations that will increase his or her safety. Projects might include additional lighting and adding grab bars. Ask your physician for a referral to an occupational therapist in your area. The average hourly wage is about $38, according to the Bureau of Labor Statistics.

Smart adaptions will help an elderly parent live safely in your home, and allow you to remain there as you get older.

Possible reductions in income

If your parent is still healthy, she can help around the house and contribute financially. But if she needs daily assistance and you decide to provide the care yourself, that usually requires taking time from work. For female caregivers 50 and older, the average amount of lost income, Social Security, and pension payments totals about $324,000, according to a 2011 MetLife study. For male caregivers 50 and older, the loss is $284,000.

A home health aide can provide such services as cooking, cleaning, reminding your parent to take medications, and taking him to appointments. They make a median of $20 per hour, according to the 2014 Genworth Cost of Care survey. Your local Area Agency on Aging office can help you find an aide, in-home skilled nursing care, and more.

Tax consequences

If your parent pays you market-rate rent, you’ll have to declare it on Schedule E when you file your taxes. But any additional expenses you have as a result of her stay, such as higher bills for electricity and food, can be counted against that income. Details are in IRS Publication 527.

You might be able to get a tax break by claiming your parent as a dependent. The biggest hurdle is your parent’s gross income, says John W. Roth, senior federal tax analyst at Wolters Kluwer Tax & Accounting in Riverwoods, Ill. Your parent can’t earn more than $3,950 if you claim him as a dependent. (Social Security payments generally don’t count.) You also have to cover more than half of his expenses for the year. And there are additional requirements; IRS Publication 501 explains the ifs, ands, or buts, and includes a work sheet.

If your parent qualifies as a dependent and needs continual care, you might be eligible for another tax break. If care is required so that you can go to work, you can claim the dependent-care credit. It can be worth up to 35 percent of your qualifying costs, depending on your income. Read Form 2441, Child and Dependent Care Expenses, to see how the rules apply to you.

Sharing support

If you have siblings, decide how each of you will contribute to your parent’s care. If no one covers more than half of her support but you each contribute at least 10 percent, one of you can claim her as a dependent on IRS Form 2120. The others must sign a document saying that they waive any tax-exemption claims for that year. You can rotate who claims the deduction annually if you’d like.  

––Mandy Walker (@MandyWalker on Twitter)

Editor's Note:

This article also appeared in the June, 2015 issue of Consumer Reports Money Adviser.

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