My 90 yr-old Mother-in-Law has come to live with us full time. For several months now we have taken care of her from afar, taking her to doctor's appointments, food shopping, etc and since she's just lost her 90 yr-old companion we felt she could not live alone. What tax benefits might there be for us in this situation? What is the criteria for claiming a dependent and how long can I claim her for 2008 since our caring for her has covered several months?
Note: If you are unmarried, you could qualify as head of household as a parent isn't required to live with you if you provided funds (more than
50%) for his/her household.
There are 5 tests for dependency:
- Relationship: Pass.
- Citizenship/residency: probably a pass. Unclear.
- Joint return: Implied pass. It appears she's not currently married.
- Gross Income: She must make less than the dependency exemption amount. Note that Social Security doesn't count (as long as other income isn't over $25k).
- Support: YOU must provide 50%+$1 of her support for the year.
The last two are often the disqualifiers for elderly relatives.
"Taking care" means little -- who was *paying* for the doctor's appointments, the food, etc? If this is early December, then "several months" implies September or so when this began.
Couldn't she have just called a taxicab to take her shopping and to the doctor? (Not necessarily a tax issue, just curious).
Who was paying for her shelter before that? Did she own her own home?
There might be some, but if you can claim you MIL as a dependent, there will be tax *disadvantages* for her (whether you actually claim her or not).
There is no such thing as "partial dependency". You look at the entire calendar year, and then look at "more than half". Dependency is all or nothing, no pro rata.
The OP said "Mother-In-Law". That implies the OP is married.
Well, not really. There are four tests:
1) qualifying child or qualifying "relative"
2) U.S. citizen or North American resident
3) did not file joint return (some exceptions apply)
4) the *taxpayer* is not a dependent (i.e. dependents cannot have dependents)
$3,500 for 2008. This includes taxable pensions, retirement plan distributions, interest, capital gains, taxable state tax refunds, etc.
If the OP only got involved as of September, it's not likely they provided more than half of the support for the entire year.
It's not so clear that she passes the joint return test for
2008. The OP said "she's just lost her 90 yr-old companion." If that means her husband died in 2008, she would probably be filing a joint return for 2008, which would disqualify her as a dependent for this year.
There's probably no tax benefits available to you for 2008. Most likely she doesn't meet the minimum to establish her being a "qualified relative", as one of the qualifiers is being a member of your household for the entire year. Talk to your tax advisor, now or during tax season, to get a better understanding of the rules on qualified relative. Also take a look at Publication 501 here:
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so you'll have some basis of understanding of the issues and then get answers to questions specific to your situation from your tax advisor. Chances are that the better possibility to claim her falls to 2009 or beyond.
No. It implies that the OP WAS married at some point. The OP might not be currently married (but could be divorced or widowed). Divorce or death does not break the relationship for tax purposes. "Living with us" could mean the OP and his current spouse, while the MiL is a prior spouse's parent. ASSUME NOTHING.
Your #4 is not in statute.
I don't see how you conclude that several = 3. Several is a small number - single digits, but more than 3. It can be as high as 9. If it's 100% support for 6+ months, that could be enough.
2007 Pub 501 is pretty sure that dependents cannot have dpendents.
Any idea where that notion arose?
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Dependent Taxpayer Test
If you could be claimed as a dependent by an- other person, you cannot claim anyone else as a dependent. Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent. If you are filing a joint return and your spouse could be claimed as a dependent by someone else, you and your spouse cannot claim any dependents on your joint return.
I think the intent of the law is that exemptions for tax purposes should be on a per capita basis, in other words, each person should be potentially claimable on *some* tax return (but no more than one). (I know, some here don't like suppositions about the intent of the law...)
Suppose two single adults (both over age 25) and teenage child (age 18) of one of them, all living together for the entire year with no one else. Adult #1 earns $50K and supports all three. Adult #2 (parent of the child) has zero income. Child has $6K earnings. (The other parent of the child becomes irrelevant for tax purposes given these facts).
Adult #1 claims Adult #2 as a dependent. Child cannot be claimed by anyone as a dependent so claims self on own return (and is therefore not required to file). Result, household as a whole benefits from three exemptions.
Now suppose Adult #2 is no longer supported by Adult #1 (for example, using funds from an inheritance, everything else the same). Even though Adult #2 is not required to file, Adult #2 is no longer a dependent and thus child could be claimed as a dependent by parent.
Adult #1 can only claim self, Adult #2 could claim two exemptions (personal and dependent) but gets no tax benefit (and is not required to file), child must file as a dependent with no exemption (but full standard deduction), pays small amount of tax. Result, household as a whole still has three exemptions but two of them don't yield any benefit.
Dick, have you written that book yet about living in sin for fun and profit? ;-)
Side note to D.Stussy: "One does not refer to a spouse as a companion"
-- to repeat your own advice, ASSUME NOTHING. One does not usually refer to an ex-MIL as a MIL (mother-in-law), even though as you point out, the "in-law" or "step-" relationship does not end with divorce or death.
"Dependents ineligible.--If an individual is a dependent of a taxpayer for any taxable year of such taxpayer beginning in a calendar year, such individual shall be treated as having no dependents for any taxable year of such individual beginning in such calendar year."
Why bring intent into this? Next thing you know, you'll be bringing logic into it :^)
This of course is not what happens here. Child is not the qualifying child of "any taxpayer" since adult 2 has no income and is not required to and does not file a tax return. So Adult 1 can claim child in your scenario. Adult 1 claims personal exemption and also claims dependency exemption for child 1 and adult 2. Three exemptions. Different way of getting there.
Nope, I constructed my example so the new rule (that is, the newer rule in 2008 regarding the new UDC rules from 2005) about QC doesn't come into play. Remember the gross income test? Child cannot be a QR of Adult #1 because of child's gross income, so the test regarding whether child is a QC of another "taxpayer" doesn't matter.
What I was trying to illustrate is that while by all normal measures, Child would be claimable as a dependent by Adult #2 (the parent), but the fact that Adult #2 could be claimed suddenly frees up Child to no longer be claimable by anyone.
I don't really know how exactly this is written into statute, but I suppose there are some unresolvable situations buried somewhere in there. For example, the dependency test about filing a joint return (one cannot be dependent if one files MFJ) has an exception which involves not being required to file (filing only to get a refund of withholding, for example). But before you can determine whether someone is required to file, you need to know if they are claimable as a dependent (so that you can determine the standard deduction). But you can't determine if they are claimable as a dependent unless you know whether they are required to file -- infinite loop.
Just to fill in the blanks...my MIL was single, the companion was a man we all referred to as Mr Joe. He had never divorced his wife but lived in my MIL's house for over 50 years. She has NO income other than SS; I saw a reference to that earlier where it was stated that SS does not count with regard to the dependency test. If the "all or none" principle applies here than I guess I should wait until tax year
Sounds right based on what you have told us. To amplify what Art wrote: It's not only that her gross income (excluding non-taxable Soc. Sec.) has to be relatively small, but *you* have to provide over half of her support. Support is independent of income: it is simply a matter of
*what* did it cost (living expenses), and *who* paid. *Where* the money came from, whether current income (including Soc. Sec.) or some other source of funds (savings, gifts, loans, inheritance, etc), is irrelevant.
I asked earlier about her shelter -- living in her own house, as you said she did earlier this year, is a major component of support she provided for herself, and has nothing to do with income.
If she lives with you in 2009 but continues to pay more than half of her own food, clothes, medical, travel, entertainment, housing (by sharing expenses, for example), and so on, you would still not be supporting her for tax purposes and therefore not able to claim her. On the other hand, if she leaves her money (including Soc. Sec. payments) in the bank and *you* provide over half of her living expenses, then you meet the support test for claiming her.
There may be other issues around whether and how her former house is disposed of, that might make this a good year to seek professional advice, maybe even before year end.
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