I cannot really comment on the effect claiming him as a dependent will have on his benefits - you may want to check with the Social Security Administration on this issue.
You can claim him as a dependent (and use him to claim the head of household filing status) if all of the following applies:
Qualifying relative:
- He cannot be claimed as a qualifying child dependent by his parents or anyone else.
- He meets the relative test as a nephew
- He cannot have income of more than 4,050 dollars for the year. This doesn't include social security income.
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You must have provided more than half of his financial support. If he spent his disability payments on his own support, you need to calculate which one of you provided more than half of his support. Use IRS Worksheet
2 on page 16 of IRS Publication 501 to calculate support provided for your nephew.
