Rental income from Dependent?

[Possi]

I have a unique situation. My client had to move her disabled sister in with her to take care of her.

My client of means, is supporting her sister and is spending a lot of money to do this. For her sister to qualify for Social Security, sister had to contribute to the household income, so she pays $500 a month "rent" to my client.

My client still pays over 50% of her sister's living expenses. She pays all the doctor bills, dental bills, clothing, outings, takes her to all of her appts, etc.

How do I handle this?

The rental income will be "other income" and no Sch E is required, right?

Sister is dependent of Tax Payer.

Am I right? I believe this is a simple situation, and I am not looking to make something bigger of this than I must!

Thanks~~

[solomon]

No Schedule E for any expense because the rent is below FMR so it is considered personal use.

[appelman]

I don't think it is income at all.

Contribution to household costs by a dependent relative who is a member of the household doesn't sound to me like income to anyone.

I also see no question about taking the dependent exemption.

But what's this about having to contribute to household expenses to qualify for Social Security? Where does that come from? It's nothing I've ever run into.

[Possi]

SS requirement

Contribution to household costs by a dependent relative who is a member of the household doesn't sound to me like income to anyone.

I also see no question about taking the dependent exemption.

But what's this about having to contribute to household expenses to qualify for Social Security? Where does that come from? It's nothing I've ever run into.

I've never heard of it, either, but it was a requirement for her to get SSI.

I'll watch for more chatter, but I like what I'm hearing....
=)

Thanks~

[appelman]

Aha!

SSI is not Social Security. For one thing, it is totally non-taxable. But watch out! How will being claimed as a dependent affect her SSI?

[spanel]

No Schedule E for any expense because the rent is below FMR so it is considered personal use.

Im not sure how you came up with that.... they are getting $500/month for a bedroom and shared everything else. In my area.. you can rent an entire house for $500/month.

IMHO its rental income. Sch E and allocate the expenses.. might not be able to report a loss (renting at less than FMV)

chris

[Possi]

Im not sure how you came up with that.... they are getting $500/month for a bedroom and shared everything else. In my area.. you can rent an entire house for $500/month.

IMHO its rental income. Sch E and allocate the expenses.. might not be able to report a loss (renting at less than FMV)

chris

Nope, not here. It is way below FMV. Not even close.

[Possi]

Ssi?

SSI is not Social Security. For one thing, it is totally non-taxable. But watch out! How will being claimed as a dependent affect her SSI?

I will ask her to be sure, but I believe it is SSI. Let me get back with you...

[spanel]

Nope, not here. It is way below FMV. Not even close.

Whats the house shes sharing rent for where you are?

Chris

[Possi]

Ssi

I will ask her to be sure, but I believe it is SSI. Let me get back with you...

She gets 522 in SSI and 172 SSDI that came from their mother. Dad never paid in to SS, as he was in a teacher's pension. That's it. Sister is carrying it all now, completely supporting her.

[spanel]

You gotta watch claiming a dependent on SSI. My brother-in-law is on SSI (same situation) and they dont claim him.. said it will stop his SSI because someone else is providing over 1/2 his support (not SSI).


Chris

[FEDUKE404]

Creative benefits

This whole thing sounds as if someone is gaming the system by continuing to receive SSI when someone else is directly/indirectly supporting her.

I would think the sister "of means" could be jeopardizing future receipt of any SSI since that sister is, by definition, providing more than 50% of the disabled sister's (her dependent) support.

Oh yes: Social Security benefits (Dad) are a separate animal altogether.

FE

[Possi]

Gaming?

This whole thing sounds as if someone is gaming the system by continuing to receive SSI when someone else is directly/indirectly supporting her.

I would think the sister "of means" could be jeopardizing future receipt of any SSI since that sister is, by definition, providing more than 50% of the disabled sister's (her dependent) support.

Oh yes: Social Security benefits (Dad) are a separate animal altogether.

FE

I am not real clear on receiving SSI, but I know they are not gaming the system. My client has left no doubt that she is supporting her sister. Her sister was left destitute by her parents when they died. They lived across the country so my client was not directly and profoundly involved in her life when their mother was still alive. Her sister is indeed disabled, cannot work, and is destitute. Her parents had nothing and left no devise to support their disabled daughter.

[FEDUKE404]

Support of sister may impact SSI

I am not real clear on receiving SSI, but I know they are not gaming the system. My client has left no doubt that she is supporting her sister. Her sister was left destitute by her parents when they died. They lived across the country so my client was not directly and profoundly involved in her life when their mother was still alive. Her sister is indeed disabled, cannot work, and is destitute. Her parents had nothing and left no devise to support their disabled daughter.

Agreed that the sisters are in a tough situation.

My comments were basically related to the fact that since the sister is (by definition) apparently providing more than 50% of her destitute sister's support - a logical conclusion by claiming her as a dependent - the other sister may not be eligible to continue to receive (full) SSI benefits under those circumstances.

The original post related to the "need" to pay $500/month for rent "for her sister to qualify for Social Security." This would seem to indicate some unknown/unstated here eligibility issues for the sister to continue to receive her SSI.

I will be the first to admit I know virtually nothing about the calculation of SSI benefits.

What I would mention is that it seems unlikely you can "have your cake and eat it" here. If the sister is being supported by her other sister, the SSI benefits may be restricted/disallowed were those facts to be known to the paying agency (state?). If, OTOH, the sister can keep her full SSI benefits by paying monthly rent to the other sister, as a tax person you would need to give some consideration as to whether there is any rental income (regardless of FMV issues) present. $6k/year is not an insignificant amount.

And this does not obviate the at least small gorilla in the room being that the destitute sister IS obviously receiving (more than) $6k/year and the other sister might not even be providing >50% of her support. This of course could be a moot point if there are many medical bills and such not covered by insurance.

BTW: Is the destitute sister not receiving any "regular" Social Security benefits??

Good luck - and keep us posted!

FE

[spanel]

Let me add this.. if this was an unrelated party paying $500/month rent.. would you include that?

If you answer that yes, how can you answer your question no?

I believe (correct me if im wrong), the only difference between non related and related is the amount of expenses you can claim (up to the amount paid for relatives).

Chris