Today TaxMama® hears from Sue in the Tax Quips Forum with this issue. “My parents are both unemployed and lived with me all year. My dad did receive unemployment, but it was about $3,300 for the entire year – my mom did not receive any unemployment. My younger sisters also lived with me – they are 13 and 17. I provided their support – I paid the mortgage (I own the home), paid for food, bills etc. Would I be able to claim my parents and my sisters on my 2012 tax return?”
You get an answer from Susan Holtgrefe, EA in PA at http://erietaxprep.com/ . She says:
Dependents come in two flavors, qualifying child and qualifying relative. Looks like you have two of each.
You may not be as familiar with the rules for qualifying relatives, there are four basic tests that must be meet;
1. They can’t be a qualifying child. You didn’t mention if your parents are permanently and totally disabled so we can safely assume they are too old to be a ‘child’.
2. Member of household or relationship test. This is met by someone if they either live with you all year (even if not related to you) or by being one of the listed relatives who don’t have to live with you, such as parents. This means that if you decide to provide your parents with their own apartment they might still be your dependents.
3. Gross income test. Your parents cannot have received more than $3700 each. This includes just about anything that isn’t exempted from tax such as unemployment. So if your Dad had received $400 more in income then he would not pass this test. (You could still possibly claim your Mom)
4. Support test. Last you have to provide more than 1/2 of their support. Do count food, part of the house and utilities, medical, transportation, recreation, etc.
Also, be mindful that the various tax credits have important differences about who qualifies for the credit. Don’t assume that just because your sisters are your dependents that they automatically qualify for anything else. The fun is in the details.
TaxMama adds that there is a “support worksheet” in IRS Publication 17 that you may want to fill out for your own tax files for 2012. Fill one out for each dependent and just put it in your own files. Don’t send it with the tax return. Incidentally, you can also claim a head of household filing status.
And remember, you can find answers to all kinds of questions about dependents and other tax and business issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed version of TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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