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CASE STUDY #14: Parent Living With Adult Child

Susan is a single adult taxpayer. Her mother, Janice, lives with her in Susan’s home. Janice is a single, U.S. citizen, age 70, and receives $15,000 per year in Social Security benefits (SS).

Dependency Janice: For Janice to be claimed as Susan’s dependent the five dependency tests must be met. Since she lives with Susan, she meets the relationship-member of the household test. She also meets the gross income test since that only applies to taxable income and her SS is not taxable. She also meets the citizenship and joint return tests. So the issue here is whether or not Janice provides over half of her mother’s support.

Consider support from all sources, including the “dependent’s” own funds; compare the total with amounts the taxpayer contributed. Amounts an individual receives for support aren’t considered support unless they are spent for support, so if Janice saved part of her SS benefits, the amount saved would not be counted towards her own support.

For a dependent who lives with the taxpayer, the amount to include for lodging is the “fair rental value” (FRV) of the dependent’s share of the home, not the actual mortgage payment, repairs, etc. FRV generally covers maintenance (so do not add it to support); it might or might not include utilities (include utilities if rent for houses in the local vicinity usually includes the cost of utilities).

Filing Status Susan: The next question is whether Susan files as single or head of household (HH). To file as HH Susan mustpay more than one-half of the cost of maintaining as her home a household, which is the principal place of abode for more than one-half the year for a qualified person. A qualified person generally includes a qualified child or a relative the taxpayer may claim as a dependent. So, if Susan can claim her mother as a dependent (meets the support test), then she is also qualified to file as head of household.    

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