I'm providing 100% support for my mother-in-law (she has 0 income) so she's a qualifying relative and I *can* claim her as a dependent. But am I required to claim her?

[ae5880]

The reason is that we'd like her to file her own taxes since she is in the process of applying for Obamacare (she just had a qualifying life change event). Question #2: what would happen if she gets a break on healthcare premiums or Medicaid or whatever and then next year we change our mind and claim her as a dependent?

[Critter · Accepted solution]

Question #2: what would happen if she gets a break on healthcare premiums or Medicaid or whatever and then next year we change our mind and claim her as a dependent?  You would be responsible for her health insurance AND if she did get the advance credit on the Obama Care program then YOU will have to pay the credit back. 

[SweetieJean]

No, you do not have to claim her. But does she live with you?  Her ability to obtain insurance (or its premium) could be impacted by the support that you provide her.

[ae5880]

No, she doesn't live with us. What's more, the healthcare application only asked if anybody was planning to claim her as a dependent, not whether she gets support from anybody. And gifts (which I guess is what we're doing for her) don't count as *income*.

[Critter]

And if she has Zero income she is not going to get any of the Obama Care insurance.

[ae5880]

you are correct, they forwarded her application to the state Medicaid office.

[Critter]

If she is your dependent then she may not be medicaid eligible ... be careful not to try to play both sides of the table.

[SweetieJean]

Which state?

[rjs]

Your mother can file her own tax return, whether or not you claim her as a dependent. Claiming her as a dependent does not prevent her from filing her own tax return.

If she does file a tax return, she cannot claim an exemption for herself. She must indicate on her tax return that someone can claim her as a dependent. The question on the tax return is different from the question on the insurance application. The question on the tax return is whether someone CAN claim her as a dependent. Since you CAN claim her, she must indicate on her tax return that someone can claim her.

So she can file a tax return whether you claim her or not. And her tax return will be the same whether you claim her or not, since you CAN claim her.

[SweetieJean]

MILhas zero income.  OP seems concerned about Medicaid for her.

[ae5880]

@SweetieJean: Michigan

[ae5880]

@Critter#2: she is not a dependent until I claim her as a dependent, right? and I hear you about playing both sides; I'm trying to pick a side that's going to hurt the least.

[Critter]

To add something to your question in the other post ... if you paid the MIL $20K for child care then not only does she need to file her own return and pay her federal , state & SE taxes  BUT you will not be able to claim her as a dependent  BUT  you could take the Day Care Credit  AND    She will also be able to apply for Obama Care insurance.

[rjs]

"she is not a dependent until I claim her as a dependent, right?"
No, that's not right. If she meets the requirements for you to claim her as a dependent, she is your dependent, whether you claim her or not, at least as far as her tax return is concerned. Other places, such as insurance applications, might have a different definition of who is a dependent, but for taxes she is your dependent, whether you claim her or not.

[TaxGuyBill]

If she has $0 of income, you can claim her as a dependent and she would still qualify for free Medicaid.

As Critter pointed out, if you pay her $20,000, you will NOT be able to claim her as a dependent, and she will need to PAY money for health insurance.