Can I claim my parents as dependents on my taxes without it affecting their Medicaid eligibility?

A fellow caregiver asked...

We are in the process of determining if my parents are Medicaid eligible (total income less than $4,000 monthly). At the same time, I am paying more than 1/2 of their living expenses and want to claim them as dependents on my tax return. If I claim them as dependents, will this impact their Medicaid eligiblity assuming that they would qualify by all other requirements?

Expert Answer

The Medicaid program provides medical and long-term care coverage for people with very low income and few assets other than the home they live in. In most states, your parents' income of close to $4,000 -- not even considering what you contribute to their support -- would be too high to qualify for Medicaid coverage, unless they also have very high, regular medical expenses. But in determining their income for purposes of eligibility, Medicaid will look not only at funds they receive in the form of payments from third parties but also any amounts they receive from you or other family members on a regular basis. For Medicaid, the key is not whether you claim your parents as dependents on your tax return -- that's between you and the IRS -- but whether you actually contribute to their support on a regular basis. If so, then the amount of that support will be counted by Medicaid as part of your parents' income for purposes of deciding whether they are eligible.