So, the next question is do you or her grandmother qualify as her dependent. Probably not.
There are two types of dependents, "Qualifying Children"(QC) and Other ("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 and student status test, a relationship test and a residence test.
A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:
- Closely Related (parent & grandparent count) OR live with the taxpayer ALL year
- His/her gross taxable income for the year must be less than $4300 (2021).
- The taxpayer must have provided more than 1/2 his support
In either case:
- He must be a US citizen or resident of the US, Canada or Mexico
- He must not file a joint return with his spouse or be claiming a dependent of his own
- He must not be the qualifying child of another taxpayer
Nontaxable Social security (including SSDI) doesn't count as income, for the income test (#2), but social security money he/she spends on her self does count as support not provided by you, for the support test (#3). Money she puts into savings & investment does not count as support she spent on herself. Note that a parent/grandparent is closely related so there is no requirement that she live with you at any time, during the year. But if you provided a home it helps your support case, unless they own the home you live in.
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 a home is the fair market rental value, divided by the number of occupants.
