I live with my mother, my sister and her two sons, can i claim my mom as dependent and my sister claims her sons?

[userem]

Thank you for the helpful detail.  Sorry...I should be more specific on my situation...
My mom is currently receiving benefits including Medicaid, Food Stamp, SSA and SSI.  I am single, provide at least 40% support to my mom and pays the total (100%) support costs for the entire household.  My gross income is $45K.  My sister is separated but not divorced.  Her sons are 16 and 15.  Her gross income is about the same as mine.  We all have been lived in same home for 4 year+.
1. do i have to be the head of household to claim my mom as dependent?
2. Despite the fact that I pays all the household expense, which filing option is best in terms of the most amount can be refunded me/sister?
a. I file my mom as dependent and as head of household, but my sister files her sons as dependents
b. I file my mom as dependent, but my sister files her sons as dependents and as head of household
c. I file as single, but my sister files her sons and mom as dependents, and as head of household

[Opus 17]

1. You don't have to claim head of household filing status to claim a tax dependent.

2. You would have to test that to be sure, it can depend on many factors.  However, if your sister does not pay more than half the household expenses, then she can't file as HOH, and if she is still legally married on 12/31, her only other option is married filing separately.  Then your choice would be single, or HOH.  You could file as single and claim your mother as a dependent, or you could file HOH using your mother as a dependent and qualifying person for HOH, or you could file as single with no dependents and your sister could claim your mother as a dependent.

Most likely, your best option will be to file HOH and claim your mother, because HOH has lower tax rates than single.

2a. allowable (your sister files as MFS), probably the best
2b. not allowed unless you lie.  Most people don't get audited, but its your risk if you do.
2c. not allowed unless you lie.

Note that if by filing HOH your sister qualifies for the earned income credit (which is disallowed by filing MFS), and if you get caught, not only does that come with back taxes, interest and penalties owed, but there is an automatic disbarment from future EIC claims for a minimum of two years.

You also missed an option, if your adjusted gross income is higher than your sister's:

2d. You file HOH and claim your mother plus one or both nephews as dependents, and your sister files MFS with one child or no dependents.

Only you can test the various options.  I suggest buying Turbotax on a CD or download and installing it on your own computer.  Each tax return is a separate document like having multiple word processor documents.  You can set up each scenario separately and compare them.

Household expenses are mortgage interest, property taxes, insurance, utilities, food eaten in the home, and repairs and maintenance.  Household expenses do NOT include personal expenses like clothing, education, medical expenses, or travel and transportation.

The rules on dependents and filing status are contained here.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p501.pdf">https://www.irs.gov/pub/irs-pdf/p501.pdf</a>

[Opus 17 · Accepted solution]

Possibly.  Let's work through this.

Living together in one home: Mom, son, daughter, daughter's children (mom's grandchildren, your nephews).

Either you or your sister can claim your mother as a dependent if your mother (1) is disabled and unable to perform gainful work; or (2) is not disabled, but has less than $4050 of taxable income and you provide more than half your mother's support.  If your mother is not disabled and has more than $4050 of taxable income, no one can claim her as a dependent.

Taxable income would include pension, 401(k) withdrawal, etc.  If her only income is social security, that does not count for the taxable income test but does count for the support test.  You must provide more than half her support costs accounting for the fact that some of her support costs are covered by social security.  If you and your sister both support your mother to the total of more than 50% but not more than 50% individually, then either one of you can claim her if you have a written agreement to do so.  (Such as, social security is 30% of her support, you provide 40% support and your sister provides 30% support.  Neither of you can automatically claim your mother but either of you can claim her as dependent if you have a written agreement.)

Then, for your sister's children, if they live in the home with her for more than half the year (or more than half the year since born if they were born this year) then she automatically gets first claim to them as dependents.  You also could claim one or both nephews as dependents if you also shared a home with the children more than half the year, you have more taxable income than your sister, and your sister agrees.  (But, each person can only be claimed as a dependent on one other tax return.)

Another issue is filing status.  If any one person in the home pays more than half the total support costs for the entire household, and that person claims a qualifying dependent, that person can file as head of household (assuming you aren't married which seems likely).  However, if no one pays more than half the total support costs for the household, no one can file as head of household.