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Thanks everyone for answering my question. I really appreciate it.
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If her income is only $850/mo. then I believe (like myself) her income is too low to require filing state and federal taxes. You can find out what the actual $ amount is where you live for filing, but my best guess is she won't have to file for herself. If that is the case and she is not claiming herself, then as long as she meets the requirements to be declared a dependent, I see no reason you can't claim her.
A tax attorney or IRS professional would be better able to give you the exact legality on this and I do recommend you make sure to dot your I's and cross your T's.
Good luck!
Wheelie :-)
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If you are good at figuring out forms and instructions, you can go to "irs.gov" and look for the section on dependents. There is a straightforward worksheet you can print out where you calculate their income and expenses and (raven is correct), as the form will show, if you contribute more than 50 percent of their support, AND they are not eligible to be a dependent on anyone else's income tax form, you may claim them as a dependent. As jinx mentioned, some of the rules are different with closer relatives, and it usually has to do with whether they live with you full time or not. There are certain individuals you can claim as a dependent even if they are living outside of your home PROVIDED they meet the relationship test and the level of support test. If you have trouble following the worksheet, you should consult a tax professional.
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No offense Apaloosa, but you've got it wrong. You just need to pay over 50% of her expenses. If you give her free rent, you can count 1/2 or 1/3 or 1/7 of your housing expenses as money you spend on her support. (Depending on how many of you share the home.) Because she is a blood relative, some of the legal barriers are a little lower.

Even if siblings contribute, and no one pays more than 50%, if your combined payment exceeds 50%, and you all agree, one sibling can claim her as a dependent.

Call the IRS or H&R Block when it's not tax season, like now, and they will help you figure it out.
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Who does your income taxes? Are they a friend or acquaintance? You need to talk to a professional about what the guidelines are for determining if your sister is a dependent. I thought if you contribution was more than half of her expenses then you could claim someone, but honestly I am not a professional and you may need to chose your words wisely when you do speak to one. Sometimes we offer too much information, when we need to be listening, the wrong choice of words can make a big difference in the outcome.

I live in my mothers house with my daughter. I provide her with 24 hour care and I receive no pay for it. I PAY HER RENT, UTILITIES AND FOOD, which doesn't sound right but I do. I have an older sister who lives here too and she too pays. Now if we were not living here with her, she would have to be in a nursing home and she would not have been able to continue living in her house because it would have been too expensive for her. In a way I almost feel like she should be considered a dependent since she could not live without us, but I do not think that would be the case in the eyes of the government.

Anyway, just check with your CPA and have him walk you through it.

Best Wishes!
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She can't be claimed as a dependent on your taxes because, as you state, she has her own income and doesn't need rely on you financially. You're basically giving her "gifts" of your own free will so she will have a buffer for later in life.

If she did truly rely on you financially, you might need help from a CPA or eldercare expert to determine whether to claim her. The rules are tricky and the IRS is not always helpful; remember, even the IRS reps give you bad advice, the IRS can still penalize you.
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I didn't mean medicare I meant Social Security
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No she doesn't pay me anything but she does get about 850.00 a month medicare. That pays for her meds cloths and anything she might need. I wouldn't ask or want anything from her. I feel she needs what she gets in case she needs it in the future for medical expenses. I provide her food, shelter, utilities. I just didn't know if I would be able to claim her on my taxes when she does get medicare
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Yes, if she totally relies on you for support in all areas, if she is paying your bills, I don't think so.
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The answer depends on a variety of factors. Did you provide most of her financial support for the year? Dependents typically are just that, they depend on you for a majority of their income and or to cover a majority of their expenses. The instructions for your tax return will walk you through the determination. In our case, we claim my mother in law as a dependent.
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