Hello,
In 2008 the limit was $3500 gross income. Does unemployment count in this? I know that social security does not. What if they make lets say $4100 but medical costs and such exceed that? Can that relative still be claimed if I provide more than half living costs? And they don't file a return - or must they file?


Thanks,
-T

Unemployment benefits are taxable income.

If his gross taxable income (which, as Five Rings notes, INCLUDES unemployment benefits) exceeds $3,500, then you CANNOT claim him/her as a dependent under most circumstances.

There are exceptions for children who are attending college and for whom you provide more than HALF of their total support.