Dependent maybe? Income maybe?

[daveiaz]

I and my wife have been caring for my brother-in-law at our home for all of 2020 as we are close to the Mayo Clinic hospital where he is being treated.  He has a terminal illness and has been on a gradual decline requiring more and more support throughout the year.  In July of 2020, after 8 months of caring for him, it became obvious that he would not be able to go back to his home and given the pandemic, placing him in a facility did not seem reasonable. 

We talked with my brother-in-law (as best we could) and his step-son (POA) and began receiving a personal check from my brother-in-law's checking account that month ($2,580/month starting in July).  The amount of this check was equal to his net monthly social security check and is being provided to offset expenses for his daily living and required care-giving.

I'm not certain if I need to treat this as income or if this should be washed against the expenses incurred?

I'm also wondering if I (should/should not) claim him as a dependent? 

Given that we have been home caring for him for the past year and another portion of our income related to our real estate business has not generated a significant amount of income in this past year.

This has been an unanticipated situation that just seemed to evolve.  I'm looking to get an idea of the proper way to handle this situation.

Any advice is greatly appreciated.

[Irene2805]

You don't have to consider the payments as income as long as it's being used to offset the expenses for caring for your brother-in-law.

From what you've mentioned, your brother-in-law is probably not your dependent.  He would have to be considered a "qualifying relative." and I'm not sure if he would pass the gross income test or the support test, described below.

To claim your brother-in-law as a dependent he needs to meet the following requirements for "qualifying relative":

1. Not a qualifying child - He is not your child, so you're OK here.
2. Member of household or relationship test – Certain relatives don't necessarily have to live with you but since he does you're OK.  
3. Gross income test - To meet this test, his gross income for the year must be less than $4,200.  Gross income is all income in the form of money, property, and services that isn't exempt from tax.
4. Support test - To meet this test, you generally must provide more than half of his total support during the calendar year.  You figure whether you have provided more than half of his total support by comparing the amount you contributed to his support with the entire amount of support he received from all sources. This includes support he provided from his or her own funds