Can a qualifying relative as a dependent still be claimed it they received an inherited IRA distribution of $10,350 and no other income?

[streedie1]

The dependent had absolutely no other income, so there is no tax due on the $10,350 distribution. But does that count against the $4,050 income limit to be claimed as a qualifying relative dependent?

[dmertz · Accepted solution]

The $10,350 is gross income that puts the person over the $4,050 gross income limit for being able to be claimed as a qualifying relative.  Gross income is all income in the form of money, property or services that is not exempt from tax.

[sara7050]

I have an inherited IRA from my Dad.  I use the RMD and also this year a much larger sum to pay for her care after breaking her hip.  In other words, my entire withdraws from the IRA were used and given to my Mom.  Is there some way that I can deduct this from the taxes for the withdraws? 

[dmertz]

No. The money that you gave to your mom is a gift and is not deductible.

[Opus 17]

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@dmertz wrote:

No. The money that you gave to your mom is a gift and is not deductible.

If the distribution was an early distribution and your mom is a qualifying relative claimed as a dependent on your tax return and you paid your mom's medical bills, you could treat whatever amount would appear on line of your Schedule A (whether or not you actually itemize and file Schedule A) as exempt from the 10% early-distribution penalty.  There are also other penalty exceptions that might apply, but are probably less likely:  https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distri...

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I believe that distributions from an inherited IRA are automatically exempt from the 10% penalty no matter what the money is used for, aren't they?

I agree, however, that the money is otherwise a gift, and not deductible as a gift.  If you could claim your parent as a tax dependent, you can list their medical expenses as schedule A itemized deductions and possibly get a partial benefit.

Also, you can deduct medical expenses you paid for your mother even if she is not your tax dependent, if you provided more than half her total financial support for the year (food, housing, travel, clothing, medical, etc.)

Why did you inherit the IRA from your father and not your mother?  You may want to see an elder law attorney if you need to make plans for your mother's medical and financial needs, instead of trying to do it on your own.  Some of the rules are very tricky. 

[dmertz]

Opus 17, you are correct.  I forgot that the distribution was from an inherited IRA.  There is no early-distribution penalty on a distribution from an inherited IRA (code 4 in box 7 of the Form 1099-R).  I've deleted mention of any early-distribution penalty.