What Are the Tax Requirements for a Dependent on SSI?
Just because someone you are supporting receives Supplemental Security Income, or SSI, payments, it doesn't automatically mean that you can't claim him as a dependent on your taxes. Whether you can claim an exemption depends on a number of requirements. SSI payments can impact one of the dependency tests -- the "support test."
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General Dependency Requirements
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Before you determine whether your potential dependent meets the support test, it is important to ensure that he qualifies to be your dependent. There are a number of requirements unrelated to income that both you and the dependent must meet, all of which are explained in the instructions for your tax form. Knowing which type of dependent you may have -- a "qualifying child" versus a "qualifying relative" -- is also very important, because SSI payments affect the two types of dependents differently.
Note that the names of the categories can be somewhat misleading. A person can be your qualifying child even if he is not your own child. If the "child" is permanently and totally disabled, he can be claimed as a qualifying child even if he is an adult. Similarly, you don't necessarily need to be related to a person to claim him or her as a qualifying relative.
Support Test for Qualifying Children
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If you are dealing with a potential qualifying child, the support test is not impacted by SSI payments. To meet this support test, your potential dependent must not have provided over one half of his support. Support provided by the child includes all taxable income, such as wages and investment income, as well as many forms of non-taxable income. However, need-based support from the government, such as SSI, is not included in this category and so does not impact your ability to claim the exemption.
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Support Test for Qualifying Relatives
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The support test for qualifying relatives is slightly different; the test is met only if you provide more than half of the support. Since SSI is need-based support from the government, they still do count as support that must be weighed against the support provided by you. In other words, you must provide more support than all other sources combined. However, there is an exception if more than one person is providing support and you have been given the right to claim the exemption under a multiple support agreement.
Gross Income Test for Qualifying Relatives
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Note that there is another income-related test for qualifying relatives, the "gross income test." Under this test, the potential dependent cannot have more than a certain amount of taxable income. The amount is subject to change. For the 2010 tax year, it was $3,650. Since SSI payments are not taxable, they should not be counted against this income limit.
Keep Accurate Records
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If your tax return is audited by the IRS, you will need documentation supporting your claim of the dependency exemption. For dependents receiving SSI payments, ensure that your records include not only the support provided by you, but also the support provided by your dependent, such as wages, and from the government, including the SSI payments. Even though you do not include it with your tax return, and even if you are certain you qualify to claim your dependent, it is still prudent to fill out and retain a copy of the "Worksheet for Determining Support" found in both IRS Publications 17 and 501.
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References
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