Can we claim my MIL as a dependent on our joint tax return if she lived with us the entire year but still owns her own home?

[lsienk]

She receives a small pension (less than $500 annually) and around $12,500 annually in Social Security benefits. She is in her '80's and while she is not officially classified as disabled, she cannot live on her own due to a stroke affecting her memory, as well as poor hearing and vision. Also, if we are able to claim her as a dependent, can she still apply for homeowner tax credits on her property?

[SweetieJean]

Did she rent out her home? And which state?

[lsienk]

Hi Jean...no she does not rent out the house she owns. The property is in Maryland.

[Hal_Al · Accepted solution]

Yes, most likely. 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 $4,050 (2016)

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

Social security doesn't count as income, for the income test, but social security money 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. 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. 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.

The fact that she owns a house is not relevant, unless it is rented. Then the gross rental income (not net income) counts for the $4050 income test.

[Hal_Al]

There are no homeowner tax credits on a federal tax return. There are only itemized deductions. She does not have enough income to be required to file  a tax return, so she needs no deductions.
But, technically, a dependent is allowed to claim itemized deductions, if they need to file a return.

[SweetieJean]

"can she still apply for homeowner tax credits on her property?"  We need to know which state, since some require that she be living in her home.

[lsienk]

She does not file taxes, and the property is in Maryland. She does not rent it out; she resides with us because she cannot care for herself adequately.