I'd like to claim my mother-in-law on my wife's and my tax return. She lived with us 7 months in 2007. She gets about $12,000 from Social Security each year, and has absolutely no other income. She is 82 years old, but not disabled.
1st) is the social security included in gross income for the Qualifying Relative test?
2nd) do I need to charge her rent? She's living free now here and only chips in on some food?
3rd) Can she be claimed on my return as a dependent?

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Originally Posted by doitrite

1st) is the social security included in gross income for the Qualifying Relative test?

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Yes - the gross income test doesn't distinguish between the various types of income, with the exception of tax-exempt income, which some SS benefits are. So if her $12K in SS are taxable, she doesn't meet this requirement.

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Originally Posted by doitrite

2nd) do I need to charge her rent? She's living free now here and only chips in on some food?

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No - Why would you? One doesn't usually charge a dependent rent.

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Originally Posted by doitrite

3rd) Can she be claimed on my return as a dependent?

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No - unless the SS income is tax exempt. But the good news is that by filing her own taxes your MIL will qualify for the stimulus payment. If you claimed her as a dependent she would not be eligible.

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Originally Posted by doitrite

I'd like to claim my mother-in-law on my wife's and my tax return. She lived with us 7 months in 2007. She gets about $12,000 from Social Security each year, and has absolutely no other income. She is 82 years old, but not disabled.
1st) is the social security included in gross income for the Qualifying Relative test?
2nd) do I need to charge her rent? She's living free now here and only chips in on some food?
3rd) Can she be claimed on my return as a dependent?

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Yes, if you provided more than half of her support that is more than $12,000 and any other income she earned.
Also she did not earn more than $3,400 (excluding SS benefits) in the year.

Read: Your U.S. Tax Return: Requirements for claiming a dependent

At that income level, the social security benefits are not gross income.