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Matt Kesler
Matt Kesler, Accountant
Category: Tax
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Experience:  BS in Accounting and BS in Finance
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Can I claim my retired in-laws (Father-64 Mother-67), who ...

Customer Question

Can I claim my retired in-laws (Father-64 Mother-67), who live at my home, as dependents? My in-laws are quite independent and have no medical issues currently. They pay no rent, they are receiving income from Social Security and use what Savings they have so they don't have to dip into their 401k's until their late 70's.
Submitted: 6 years ago.
Category: Tax
Expert:  Matt Kesler replied 6 years ago.
To be claimed as a dependent the person in question must qualify as either a Qualifying Child or Qualifying Relative. Obviously, we can rule out the child immediately.

There are four tests to be met to decide if either /or both is a qualifying relative.

-First, they must not be a qualifying child. This is met.
-Second, they must live with you for the entire tax year. They do, so this is met. The fact that they are step-parents doubly qualifies them in test 3.
-Third, the person must have gross income under $3,300. This is all taxable income they have for the year. If over $3,300 they do not qualify.
-Fourth, you must provide over half the support for this individual. This may be the tricky part if they are using Savings to help support themselves. The housing you provide will go a long way towards proving half of the support but if they buy their own food, take care of medical costs, and other expenses they may be paying more than half their own support.

If all four of those are met they will be a Qualifying Relative.

Now you'll need to pass three tests to take the actual dependency claim.

-First, they cannot be claimed as a dependent on anyone else's tax return.
-Second, they cannot file as married filing jointly on their tax return (if they file a tax return).
-Third, they must be a US citizen.

If everything on those lists is met you can claim either, or both, as dependents.

You can read more on the topic in this IRS publication:

http://www.irs.gov/pub/irs-pdf/p501.pdf
Matt Kesler, Accountant
Category: Tax
Satisfied Customers: 2734
Experience: BS in Accounting and BS in Finance
Matt Kesler and 7 other Tax Specialists are ready to help you
Customer: replied 6 years ago.
To be claimed as a dependent the person in question must qualify as either a Qualifying Child or Qualifying Relative. Obviously, we can rule out the child immediately.

There are four tests to be met to decide if either /or both is a qualifying relative.

-First, they must not be a qualifying child. This is met. (Great)
-Second, they must live with you for the entire tax year. They do, so this is met. The fact that they are step-parents doubly qualifies them in test 3. (Perfect)
-Third, the person must have gross income under $3,300. This is all taxable income they have for the year. If over $3,300 they do not qualify. (is money from SS and Savings taxable?)
-Fourth, you must provide over half the support for this individual. This may be the tricky part if they are using Savings to help support themselves. The housing you provide will go a long way towards proving half of the support but if they buy their own food, take care of medical costs, and other expenses they may be paying more than half their own support. (Will I have to provide an itemized expense sheet to prove the 50% support, right now they do not pay rent at all, if they did it would be around $9600 per year and I do provide for Food / Utilities. I'd like to add that they do have their own detached private living space being a 1 bedroom, 1 bath w/ kitchen on my propert.)

If all four of those are met they will be a Qualifying Relative.

Now you'll need to pass three tests to take the actual dependency claim.

-First, they cannot be claimed as a dependent on anyone else's tax return. (got it covered)
-Second, they cannot file as married filing jointly on their tax return (if they file a tax return). (Should they file if they don't work at all?)
-Third, they must be a US citizen. (That, they are!!!)

If everything on those lists is met you can claim either, or both, as dependents.
Expert:  Matt Kesler replied 6 years ago.
First, the Social Security benefits are not likely to be taxable since they are the only form of income. The savings was previously earned income they are simply using now so it does not count as income at all.

You can visit this site for clarification but I believe the Social Security Benefits will not be taxable income.

http://64.233.169.104/search?q=cache:UdqS2gjvnDYJ:www.irs.gov/newsroom/article/0,,id%3D107537,00.html+Social+Security+Taxable&hl=en&ct=clnk&cd=1&gl=us

You may be required to provide proof if audited. Form 501, which I linked to in the last post, provides a section with instructions on figuring out percent of support paid.

Most likely, since they have no taxable income, they will not need to file a return at all. However, you can visit the following link to be sure:

http://www.irs.gov/individuals/article/0,,id=96623,00.html

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