Ramifications of claiming qualifying relative as dependent

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gwe67
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Ramifications of claiming qualifying relative as dependent

Post by gwe67 »

Wife's mother, let's call her DMIL, lives in a house that we own (not with us) and we do not charge rent. The house would rent on the open market for an amount that is greater than DMIL's income, which is social security retirement (not SSI or disability). DMIL has no other income. We also provide house cleaning, transportation, yard maintenance, security, exterminator services, etc. DMIL pays for her utilities, medical, food, and other expenses. DMIL is single, elderly, and disabled. DMIL has neither worked nor filed a tax return in many years. We have never claimed her as dependent previously. DMIL only has a small amount of cash, no real estate, and no retirement savings. So, it appears that we provide for most of her financial support, and therefore DMIL can be claimed as a dependent on our joint return.

It looks like claiming DMIL as dependent would reduce our taxes owed by $500, and would not affect any "stimulus" payments that DMIL has received.

However, what other ramifications of claiming qualifying DMIL as dependent might there be? DMIL is very hesitant to apply for aid that she might receive, such as food stamps. But, if claimed as a dependent, would she become ineligible for these types of programs? Anything else we need to consider?
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terran
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Re: Ramifications of claiming qualifying relative as dependent

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livesoft
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Re: Ramifications of claiming qualifying relative as dependent

Post by livesoft »

Maybe you will want to file amended tax returns for past years?
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123
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Re: Ramifications of claiming qualifying relative as dependent

Post by 123 »

A frequent issue with claiming elderly relatives as dependents is the requirement that the dependent have less than $4,300 a year in gross income. Gross income would include the portion of social security withheld for Medicare premiums.
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gwe67
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Re: Ramifications of claiming qualifying relative as dependent

Post by gwe67 »

livesoft wrote: Sun May 16, 2021 5:09 pm Maybe you will want to file amended tax returns for past years?
No, 2020 was the first year that DMIL would qualify as dependent.
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gwe67
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Re: Ramifications of claiming qualifying relative as dependent

Post by gwe67 »

123 wrote: Sun May 16, 2021 5:32 pm A frequent issue with claiming elderly relatives as dependents is the requirement that the dependent have less than $4,300 a year in gross income. Gross income would include the portion of social security withheld for Medicare premiums.
This is what is shown on the SSA-1099:

"Paid by check or direct deposited" $13,608.
"Medicare Part B premiums deducted from your benefits" $1,735.
"Benefits for 2020" $15,343.

There was no other income.
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pshonore
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Re: Ramifications of claiming qualifying relative as dependent

Post by pshonore »

123 wrote: Sun May 16, 2021 5:32 pm A frequent issue with claiming elderly relatives as dependents is the requirement that the dependent have less than $4,300 a year in gross income. Gross income would include the portion of social security withheld for Medicare premiums.
From Pub 501:
Gross income means all income you receive in the form of money, goods,
property, and services that isn't exempt from tax, including any income from sources
outside the United States or from the sale of your main home (even if you can exclude
part or all of it). Don't include any social security benefits unless (a) you're married
filing a separate return and you lived with your spouse at any time during 2020, or (b)
one-half of your social security benefits plus your other gross income and any
tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b)
applies, see the Form 1040 and 1040-SR instructions to figure the taxable part of
social security benefits you must include in gross income
None of her SS is taxable
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gwe67
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Re: Ramifications of claiming qualifying relative as dependent

Post by gwe67 »

pshonore wrote: Sun May 16, 2021 7:36 pm
123 wrote: Sun May 16, 2021 5:32 pm A frequent issue with claiming elderly relatives as dependents is the requirement that the dependent have less than $4,300 a year in gross income. Gross income would include the portion of social security withheld for Medicare premiums.
From Pub 501:
Gross income means all income you receive in the form of money, goods,
property, and services that isn't exempt from tax, including any income from sources
outside the United States or from the sale of your main home (even if you can exclude
part or all of it). Don't include any social security benefits unless (a) you're married
filing a separate return and you lived with your spouse at any time during 2020, or (b)
one-half of your social security benefits plus your other gross income and any
tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b)
applies, see the Form 1040 and 1040-SR instructions to figure the taxable part of
social security benefits you must include in gross income
None of her SS is taxable
Thanks!
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Jablean
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Re: Ramifications of claiming qualifying relative as dependent

Post by Jablean »

If you were on ACA heath care then claiming her as a dependent would raise your household number by 1 making it easier to fit under the previous ACA income cliff.
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