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Welfare payments are not income for the income test. But they are support, not provided by you, for the support 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:
1. Closely Related OR live with the taxpayer ALL year
2. His/her gross taxable income for the year must be less than $4150 ($4,050 in 2016-17)
3. The taxpayer must have provided more than 1/2 his support
4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own
6. He must not be the qualifying child of another taxpayer
Nontaxable Social security and cash assistance payments doesn't count as income, for the income test, but that money he/she
spends on her self does count as support not provided by you, for the support
test. Note that a parent 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. If no
one person (or married couple) provides 50% of the support (for example your
siblings are 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.
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