How does my girlfriend's social security disability benefits affect my taxes? Can I still claim her as a dependent? Do I report the income? What about the lump sum?

[snp232]

We live in Tennessee.  My girlfriend receives social security disability income (SSDI) and has no other income.  She lived with me all year in 2016.  She is older than me.  She received a lump sum back payment in November 2016.

1. Do I include her SSDI benefit in my income?

2. Does she still count as my dependent?

• I have to pay more than half of her cost of living for the year.  Does the SSDI count against me?  Or, because she has no income other than SSDI, am I still safe?
• She is older than me.  I heard the laws changed recently.  Is that true?

3. What about the lump sum payment? Do I only include the portion that is for 2016 (assuming I include it at all)?  Do I use it as paying part of her living expenses (assuming I have to do this too)?

[Hal_Al · Accepted solution]

1. You do not include any of her SSDI or the lump sum as income on your return. A taxpayer does not include his dependent's income. The dependent files her own return, if she has sufficient income. If SSDI (including lump sums) is her only income, she does not have to file.

2. SS, including SSDI,  doesn't count as income, for the $4050 income test, but social security money he/she spends on her self does count as support not provided by you, for the support test. Money she puts into savings & investment does not count as support she spent on herself. If no one person  provides 50% of the support (for example her family is also sending support), then a "multiple support agreement” (IRS Form 2120) can be used, to allow you to claim the dependent. https://www.irs.gov/pub/irs-pdf/f2120.pdf

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.

3. The lump payment is only considered support if it is spent on support. It isn't support if it goes into savings.

The being older rule does not apply to her. It's for claiming a person who can be classified as a "Qualifying Child". Since she is not related, it's not relevant.