Tax Planning Strategies for High Income Earners Supporting Retired Parents

Thanks for this info! Question though - if my dad gets Social Security and a small pension (about $1,800/month combined), does that disqualify him from being my dependent? Also, is there any benefit to gifting him money directly vs. paying his bills?

Social Security generally doesn't count toward the gross income limit for dependency purposes, so it's mainly his pension and any other income that would count toward the $4,800 threshold. If his pension is around $1,000/month ($12,000/year), that would exceed the limit, so he probably wouldn't qualify as your dependent. As for gifting versus paying bills directly, there are some potential advantages to direct payments. If you pay medical providers or educational institutions directly, these payments are exempt from gift tax considerations. Otherwise, direct gifts up to $18,000 per year won't incur gift tax reporting requirements, but they don't provide you any tax deduction. Paying certain expenses directly (like qualified medical expenses) might allow you to claim deductions if you itemize and meet the threshold requirements.

Does it actually give personalized advice? Most "tax tools" I've tried just give generic information I could Google. Can it help with figuring out the medical expense deduction threshold situation?

I'm somewhat skeptical about these AI tax tools. How does it handle state-specific tax rules? I live in a high-tax state and my father lives in a different state, so our situations get complicated fast.

It definitely provides personalized recommendations based on your specific numbers and situation. It's not just generic advice - it runs calculations on your actual tax data to find optimization opportunities. For medical expenses, it calculated exactly how much I needed to spend to cross the 7.5% AGI threshold to make itemizing worthwhile, which saved me a ton. For state-specific issues, that's actually where it really helped me. My mother lives in Florida while I'm in California, and it identified specific cross-state planning opportunities I wouldn't have known about. It analyzes both federal and state tax implications to give you the complete picture of how different support strategies would impact your overall tax situation.

How does this actually work? Do they just call the IRS for you? Seems weird the IRS would allow this kind of line-cutting service.

This seems like a scam. There's no way to "skip the line" with the IRS. They have one phone system and everyone has to wait. I'd be very careful about giving any tax info to third-party services claiming to have special access.

They don't call the IRS for you - they use a system that navigates the IRS phone tree and waits on hold, then calls you once they reach a human. You're the one who actually talks to the IRS agent, not them. They just handle the hold time so you don't have to sit there for hours. It's completely legit and doesn't involve "cutting" any lines - it's just automating the hold process. I was skeptical too, but it's actually pretty straightforward technology. You still go through the normal IRS channels, but their system handles the frustrating part of waiting on hold. And they don't need any of your tax information - they just call you when they reach an agent, then you handle everything directly with the IRS.

That's interesting - I hadn't heard about the Dependent Care FSA option. My dad is generally independent but has mobility issues that require some help. Would occasional home health aides or transportation assistance qualify, or does it need to be full-time care?

It doesn't have to be full-time care to qualify. If your father has legitimate mobility issues that require assistance, expenses for home health aides, adult day care, or transportation to and from care facilities while you're working would generally qualify. The key requirements are that the care must be necessary for your wellbeing (allowing you to work), and your father must live with you for more than half the year and be physically unable to fully care for himself. You'll need a doctor to document his condition and care needs. Keep in mind the $5,000 annual limit applies to all dependent care expenses combined, so if you have children also using this benefit, that's the total cap.

QPRTs are typically used for estate planning, not really for current tax benefits. It's where someone puts their house in a trust but retains the right to live there for a set period. After that period ends, the house goes to the beneficiaries (like children). The main benefit is reducing estate taxes by getting the house out of the estate at a discounted value. But it's complex and probably overkill unless your dad has a very valuable home and a large overall estate that might exceed the federal estate tax exemption (currently $13.61 million).

Thanks for explaining! That makes sense - my dad's house is only worth about $220k so probably not worth the complexity. I'll focus on the more immediate tax benefits mentioned above instead.