Thank you all. I was reading Publication 501's all taxable social security benefits in the literal sense that it COULD be taxed, not whether or not it was actually taxed. So she received $11,000 in Form SSA-1099 social security benefits. This has the POTENTIAL to be taxed, which is why I thought she was above the $4300 threshold. But because she was not ACTUALLY taxed on it because she had no other income and didn't reach that $25,000 threshold, she owes no tax, and in addition I can claim her as a dependent.
