Tax Saving Tip 2023: How is the dependent parent and dependent grandparent allowances calculated? What is the amount of tax allowance?
The Dependent Parent and Grandparent Allowance is a very useful tax benefit. As the name implies, it is designed to help reduce the tax burden of those who are supporting a parent or grandparent. If you qualify, you can claim the allowance each year when you file your taxes. In this article, we will summarize some information about the dependent parent and grandparent allowances for taxpayers to consider.
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Table of Contents
Dependent Parent and Grandparent Allowances?
Eligibility for the dependent parent and grandparent allowances?
How do I claim the dependent parent and grandparent allowances?
What is the amount of the dependent parent and grandparent allowances?
Dependent parent and grandparent allowances?
Hong Kong taxpayers are entitled to a dependent parent or grandparent allowance for each dependent parent or grandparent. If the taxpayer lives with their spouse, they are also entitled to the dependent parent, grandparent or grandparent allowance for their spouse.
If you need to claim an allowance, make sure you provide the relevant documentation and information to prove that you qualify.
Eligibility for the dependent parent and grandparent allowances?
To claim the dependent parent or grandparent allowance, a parent, grandparent or grandparent needs to meet three requirements:
Must be habitually resident in Hong Kong;
Must be at least 55 years of age or eligible for the Government Disability Allowance Scheme;
The applicant must have lived with the applicant continuously for at least 6 months without paying all the expenses, or the applicant or his/her spouse must pay at least HK$12,000 per year to support the parent, grandparent or grandparent.
The number of days of stay in Hong Kong;
In addition, if the taxpayer’s parent, grandparent lives with the taxpayer “continuously throughout the year” and does not pay the full cost (maintenance), the taxpayer is entitled to an additional tax allowance.
And the IRD will take into account the following objective factors when determining whether a dependent is “habitually resident” in Hong Kong:
Whether or not the dependant has a fixed abode
Whether he/she owns a residential property outside of Hong Kong
whether he/she works or conducts business in Hong Kong
and whether the relatives or friends of the parent are mainly residing in Hong Kong, etc.
For tax purposes, the definition of “parent” includes the taxpayer’s
biological parents;
Step-parents;
The spouse’s natural parents;
Legally adopted parents;
The parents of a deceased spouse.
In turn, the definition of “grandparent” includes the taxpayer’s:
Biological grandparents;
maternal grandparents;
adoptive grandparents;
step-grandparents; step-grandparents
A spouse’s natural grandparent, adoptive grandparent, step-grandparent or step-grandparent
Grandparents of the deceased spouse.
How do I claim the Dependent Parent and Grandparent Allowance?
If you are eligible, you can claim the dependent parent and grandparent allowances on your annual tax return. When completing your tax return, you will need to provide relevant documents and information, such as your parent or grandparent’s name, ID number, dates of support, number and amount of related expenses, etc.
If more than one taxpayer is eligible to claim the same dependent’s allowance, only one taxpayer can make the claim. A consensus must be reached among all parties involved as to who will file the claim.
In addition, if the taxpayer or his or her spouse has deducted expenses related to the dependent’s elderly residential care, then the taxpayer or his or her spouse cannot claim the related allowance for the same dependent in the same tax year to ensure fairness and reasonableness of the tax benefit.
What is the amount of the dependent parent and grandparent allowances?
The amount of the allowance varies depending on age and eligibility for the allowance.
If a parent, grandparent is under the age of 60, then their allowance is HK$25,000, while if they are aged 60 or above, the allowance is HK$50,000.
In addition, if they are 55 years of age or older but under 60 years of age, and are eligible for the government disability allowance program, they are also eligible for a tax allowance of HK$50,000. The above information is for reference only. If you have any questions or information about tax filing (personal tax return, corporate tax return, accountant tax return), you are welcome to contact our professional advisors and we will provide you with a free quote and consultation service later.
