Exemption/Dependent Question

[zeros]

If Mother lived with me all year and had a private annual pension of $3600.00, which is over the $3400.00 allowed, is the exemption automatically disallowed? Also had social security income. Reply will be appreciated.

[travis bickle]

don't see how.

If Mother lived with me all year and had a private annual pension of $3600.00, which is over the $3400.00 allowed, is the exemption automatically disallowed? Also had social security income. Reply will be appreciated.

the irs specifically says that in order to be a qualifying relative, the individual must "have gross income for the calendar year that is less than the exemption amount (as defined in section 151(d))".

the problem is that the above citation does NOT say "wages, earnings, etc." it simply says "gross income".

is there something i am missing?

travis

[zeros]

Gross Income Test

According to Publication 17, page 30, tax exempt income, such as certain social security benefits, is not included in gross income.

[veritas]

correct

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[S T]

Besides Gross Income

I believe the t/p has to meet the 50% or greater support as well which does include non taxable income. So you should calculate the Dependency Support Worksheet

Do you have CFS Tax Tools, they have a good Dependency Support Worksheet as well as a Dependency Exemption - can they qualify Flowchart.

Sandy

[dtlee]

According to Publication 17, page 30, tax exempt income, such as certain social security benefits, is not included in gross income.

Right,

And if the pension is considered, say 90% taxable, the nontaxable portion would not be considered when computing the gross income limitation and she would be eligible to be claimed as a Qualifying Relative. However, with just the facts you provide, I am assuming that this is a taxable pension, although I am also assuming that the social security benefits are not taxable (though this would depend on her filing status and total benefits received which you do not cite).

However, since her income is above the gross income threshold with just the pension, the taxability of the Social Security is not an issue.

[dtlee]

I believe the t/p has to meet the 50% or greater support as well which does include non taxable income. So you should calculate the Dependency Support Worksheet

Do you have CFS Tax Tools, they have a good Dependency Support Worksheet as well as a Dependency Exemption - can they qualify Flowchart.

Sandy

Not sure what you are saying, but social security payments received by an individual and used for that individual's support are considered support contributed by that individual for that individual's own support whether or not the payments are determined to be taxable.

[dtlee]

I believe the t/p has to meet the 50% or greater support as well which does include non taxable income. So you should calculate the Dependency Support Worksheet

Do you have CFS Tax Tools, they have a good Dependency Support Worksheet as well as a Dependency Exemption - can they qualify Flowchart.

Sandy

Perhaps we have a different version of CFS Tax Tools. On my version, under "Funds belonging to the Person You Supported" it says on line 1:

Enter the total funds belonging to the person you supported, including income received (taxable and nontaxable) and amounts borrowed during the year, plus the amount in savings and other accounts at the beginning of the year

and I do not see them removing nontaxable income on any of the other lines, so even my version of Tax Tools seems to use nontaxable income received and used for support as the dependent candidates self-support.

[S T]

Yes dtlee

You are right, I mis-read the gross income amounts. At $3,600 pension income she is over the limit on gross income.

Sandy

[dtlee]

Would it be possible however, if the mother is totally and permanently disabled and the t/p provides 50% or greater, the mother might qualify as a dependent. Sandy

I really love how they simplified these rules so that everyone would now understand them. The average taxpayer thinks they know what a dependent is, while the tax professionals wander in circles trying to make sense of the rules.

You are quite right! If the mother is considered totally and permanently disabled, the gross income test is passed and then the only issue would be whether or not the taxpayer provided more than half of the dependent candidate's support. The CFS Tax Tools worksheet is good for that as are several other tools.

There are a few things that zeros needs to review to make a full determination.

[POCAHONTAS]

Tax Tools

If one does not have CFS Tax Tools Is there another source a good worksheet can be obtained for dependency exemption and other worksheets. Thanks

[dtlee]

If one does not have CFS Tax Tools Is there another source a good worksheet can be obtained for dependency exemption and other worksheets. Thanks

It's not automatic, but the one on page 18 of Publication 501 is pretty good.

[POCAHONTAS]

It's not automatic, but the one on page 18 of Publication 501 is pretty good.

Thanks Doug