Question regarding qualifying relative

[dead.electric]

What is the name of your state (only U.S. law)? WA

Regarding claiming a "qualifying relative" as a dependent:

Does the requirement of providing over half of support extend to payments from insurance / state assistance that went directly to medical care? I am doing taxes for friends and their son was in a bad accident in 2010. He spent slightly less than half of 2010 in the hospital or in an assisted living/rehab facility, which was paid for by (1) the other party's car insurance and (2) Washington state DSHS (State Medicaid provider) which covered him at the time. He lived with them before the accident and didn't earn anything. I'm sure the medical care cost exponentially more than supporting him prior to the accident, but neither he nor his parents actually saw any of the money.

Can they claim him?

Thanks!

BrianWhat is the name of your state (only U.S. law)?

 

[TinkerBelleLuvr]

The assisted living can be considered temporary absence from the home. Did he earn any money PRIOR to the accident?

 

[OK-LL]

He lived with them before the accident and didn't earn anything.

Apparently not.

 

[OHRoadwarrior]

I would say based on your info, no. You need to figure the rough dollar amount of state aid he received and see if it was greater than 50% of the support their son received. The insurance paying med expenses was not income, it was restoration. The amount provided by the state has a cash equivalent value, just as if he received cash from them.

Support provided by the state (welfare, food stamps, housing, etc.). Benefits provided by the state to a needy person generally are considered support provided by the state. However, payments based on the needs of the recipient will not be considered as used entirely for that person's support if it is shown that part of the payments were not used for that purpose.

Publication 501 (2010), Exemptions, Standard Deduction, and Filing Information

 

[LdiJ]

I would say based on your info, no. You need to figure the rough dollar amount of state aid he received and see if it was greater than 50% of the support their son received. The insurance paying med expenses was not income, it was restoration. The amount provided by the state has a cash equivalent value, just as if he received cash from them.



Publication 501 (2010), Exemptions, Standard Deduction, and Filing Information

The rule for a qualifying relative is that the person must have lived the entire year in the home of the person who wants to claim them (and I agree with Tink that hospital/rehab would be considered a temporary absence) and the person must have income of less than 3650.00 for 2010. There is no requirement regarding more than 50% of support in this instance.

I would recommend that the parents in question get a consult with a local tax professional. However, at first glance, my opinion would be that the parents have the right to claim this adult child as a dependent...despite the fact that medicaid may have contributed towards medical costs after insurance ran out.