My 91-year-old father with mild dementia is living with my husband and me. He had been living in an "independent living" senior community, but could no longer manage that. It was a happy coincidence that the previous year, I had lost my job when I returned after taking a week off to move to a house I had just bought. So now, Dad contributes to our household the amount of money he otherwise would be paying for an assisted living facility (it's less than he would have to pay for memory care) -- about $3500/mo. His contributions go directly to our housing expense (i.e., the mortgage payment). I don't partition his contributions between rent, food, and services I perform.
I cook for him, take him to see his doctors and on other errands, take him with me everywhere I go (so he gets to socialize with my husband's and my friends), take him on daily walks, make sure his personal bills get paid and manage his assets (I have his Durable Power of Attorney), help him with dressing when he needs it, do his laundry, help him figure out how to use the TV when he forgets, restore his cell phone when he accidentally resets it to factory settings. He pays for his own cell phone, magazine and newspaper subscriptions, clothes, dry cleaning, and personal purchases on Amazon, including the grab bars that I installed in "his" bathroom. I pay for cable TV, Internet, food, utilities, and I bought the steel railing and paint that I installed in the front of the house for him.
Dad is not our dependent, and we are not his. My husband and I file a joint income tax return.
Question: Should I be reporting Dad's contribution to household expenses as income, or should Dad be reporting it as a gift? He's never going to exceed the lifetime gift exclusion (his net worth is about 1.25M and he has five children). I didn't worry about it in 2019, but for 2020 Turbo Tax is flagging our return as high risk for audit (I forgot to do a planned Roth IRA conversion and we've been living off my retirement savings, hubby's pandemic unemployment assistance, and Dad's contributions, so we have essentially 0 taxable income after deducting mortgage interest and health insurance premiums), so I want to be sure we have our ducks in a row.
Thanks,
Rebeccah
