Hi. In the next year, an elderly parent may be moving in with us. He would qualify as a dependent under IRS rules. But we have been subject to the AMT for many years running now do to living in a high tax state and having 2 dependent children. If we claimed the parent as a dependent, would that increase our taxes even more because of this extra dependent? If we filed the FAFSA and they ask how many household members, can we put him down if we didn’t claim him as a dependent on our taxes (even though he qualifies as dependent)? Does having an extra household member decrease our EFC?
To have them qualify as a dependent you would need to pay more than half of their support I think. Do they get social security income?
I don’t know how the AMT would be affected. You would need to run a tax estimator online, there are several.
What income do the grands have? SS? Pension? Do they have Medicare?
Unless they are new immigrants who don’t have these benefits, it may be impossible to demonstrate that you’re providing for more than 50% of their support. For example if they’re receiving $1500 a month in pension/SS (plus Medicare), how will you be able to show that you’re actually paying out at least a couple thousand per month for them?
Generally, having an extra dependent will decrease your taxes, because you get to claim an additional exemption. The AMT may influence this.
FAFSA and the IRS have different definitions for the term household member/dependent. As long as the person meets the requirement for the paperwork you are doing, you are good to go.
He gets $1800/month in social security/pension. Going rate for rental in our neighborhood for similar house is $3200/month. He would live in in-law suite–don’t know cost of that. Plus utilities, food, driving him places, housekeeping, etc. (high cost-of-living area). Anyway, having him as a dependent does not help our taxes for sure. But does it actually cost in taxes due to AMT? And is he a household member for FAFSA purposes? How much does an additional person save on EFC?
When you figure household expenses you need to prorate by the members in household when figuring support. You can’t just use what the going rate for rent in your neighborhood is, and all of the utilities and food. If the elderly parent lives in your house, you figure what your actual expenses are and divide them by number of people living in household.
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He would live in in-law suite–don’t know cost of that
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Well, what would you rent that for? Is it like a studio apt? It doesn’t matter how much your home would rent for.
Does he qualify for Medicare? Not sure what that’s worth…but probably at least 700 a month…more if he’s on medication, and has doctor visits.
What will he be using the $1800 a month towards? I think schools won’t believe that he’s spending all of that only on himself and not paying anything towards his upkeep
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One child in college next fall. About $234,000 AGI, $300,000 in non-retirement assets (529 included, does that count in assets?), $450,000 in home equity (200,000 mortgage).
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You have a lot in assets. That along with the income are going to likely mean no aid.
Do an online search for ‘tax estimator’ and run your numbers through with one extra dependent and see if the tax is more or less than you pay now. But you need to make sure you qualify to claim them as a dependent on your taxes before you do so.
BTW…you need to use your own CC acct. using your child’s account is a TOS violation
https://fafsa.ed.gov/fotw1718/help/pnumInHousehold.htm
FAFSA rules for number in household
Agreed. And the higher income is the primary reason for being subject to the AMT; you can’t pin it on living in a high tax state with two dependent children.
@mom2collegekids my Medicare premium is about $190 a month and that includes an IRMA…which is an uptick for high wage earners. Medicare does NOT cost $700 a month. That $190 includes parts A and B.
My supplement is an addition $140 a month…but even adding the Medicare and supplement together…it’s NOT $700 a month.
@thumper1 I didn’t word that correctly. I remember @kelsmom mentioning Medicare. I think she was attributing the costs that Medicare was covering, not the premium amount.
Meaning that if Medicare was covering - say - $700 a month in Rx and doc visits, then that’s $700 to be added to the person’s monthly expenses…so someone who is getting 1800 pension/ss and having Medicare pay for $700 a month in medical expenses, would need their adult child paying out over 2500 a month to show that they’re paying for more than 50% of their care.
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the number of people who are not your parents’ children but who live with your parents and receive more than half of their support from your parents, and will continue to receive more than half of their support from your parents between July 1, 2017 and June 30, 2018.
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That is a hard threshold to meet when the parent has an income of 1800/month. Kelsmom once said that typically in cases like this, the parent is actually contributing to the household by paying rent, etc. (even if that’s not your plan). Usually when people let their older parents come live with them for free it’s because they only have some tiny SS payment that is needed for some very basic personal expenses.
A CSS Profile school will heavily proble the counting of that older parent.
. I’m not even sure that you can count “lost rent” of the in-law suite, which is part of your property, unless maybe you can show that you’ve been renting it out previously (and claiming that rent on your taxes). That would be like me claiming “lost rent” to the granny suite in my home that I’ve never rented out because it’s used by guests who visit.
Is the Medicare premium considered part of his expenses? His medications cost a few hundred dollars a month too. In addition to our providing room and board, he is likely to require a home health aid and that is likely to add up to a lot of money right there–more than he has coming in. After doing some research, I discovered adding him would amount to a $4950 income exclusion which is unlikely to reduce our EFC much anyway.
Sorry, didn’t know I couldn’t use kid’s account.
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Right, but the amount that Medicare is covering is counted as his support…so if Medicare is paying for a few hundred a month of Rx and a few hundred a month for doctors and lab tests, then that gets added to his “income,” so to speak (I’m not talking about the amount that he pays, I’m talking about the amount that Medicare is paying). Meaning that he would have 1800 plus 1000 towards his expenses, and that would mean that you would have to show that you’re paying out over 2800 a month of YOUR money (not any of his). You wouldn’t be able to just tack on some amount as “rent”. The concept of room and board is vague when it’s your home.
moderator’s note
Sharing an account is against CC’s TOS