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When Adult Children Move Home: Take Tax Advantage

  • 26 May 2015
  • Author: Cari Holbrook
  • Number of views: 2445
  • 0 Comments
When Adult Children Move Home:  Take Tax Advantage

They’re called the “boomerang” generation: young adults who move back into their parents’ homes, usually to save money after college. One study revealed that nearly 40 percent of young adults ages 18 to 34 have moved back in with their parents for a time after moving out.

This trend can take its toll on a family, both emotionally and psychologically. It can also have a big impact on the financial wellbeing of empty-nester parents. Of course, we’d all love to help our adult kids get a head start in life, if we can. The trick is to not pay a significant amount of taxes for that help. To achieve this, it’s important to find ways to offer financial support without triggering the gift tax (the trigger is currently $14,000 for individual taxpayers and $28,000 for couples filing jointly).

First, look into whether or not the adult child can still be claimed as a dependent. Individuals under the age of 24 and going to school for at least five months out of the year can still be claimed as dependents for tax purposes. Older individuals may still qualify but there are plenty of hoops to jump through to make that happen. It’s also important to note: Even if an individual cannot be considered a dependent for tax purposes, adults under 26 years of age can still be added to or kept on a parent’s health insurance policy, which is another tax-free way to offer financial support.  

Second, if your child is going to school or planning to pursue a new degree at least part-time, be strategic about your role in paying tuition. If you are able to claim your child as a dependent, you may be able to receive tax credit for helping out. However, your modified adjusted gross income must be under $160,000 (for married couples filing jointly) in order to receive the full deduction.  

Finally, remember to take full advantage of everyday tax deductions while you help your child get a leg up. Job hunting could have plenty of tax deductions associated with it—from specialized clothing (uniforms, etc.) purchased to moving expenses when the child is ready to become independent once more.

Need more ideas and strategies?  Contact us.   

Image Copyright: 123RF Stock Photo
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