@xmasbaby0 You appear to have left off the support test on the list of Qualifying Child Rules:
- They did not provide more than 1/2 their own support.
Nontaxable Social security doesn't count as income, for the income test, but social security money he spends on himself does count as support provided by the potential dependent, for the support test. Money he puts into savings & investment does not count as support he spent on himself.
The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf The support value of the home, provided by the taxpayer, is the fair market rental value, divided by the number of occupants.
There are two types of dependents, "Qualifying Children"(QC) and standard ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit, student (or disability) status, a relationship test and residence test. Only a QC qualifies a taxpayer for the Earned Income Credit.
The support test is different for each type. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.
