In this tough economy we see millions of degreed adults unable to find work. As a result, many have returned home to live with family, gone back to school to learn a new skill, and are most likely receiving some kind of government benefit such as unemployment insurance payments and/or cash aide (welfare, food stamps).

Someone who is in the situation, let’s call him Jerry, wanted to know if his mother, the family member with whom he lived, could claim him as a dependent.  At this point Jerry was no longer receiving unemployment payments, but was the holder of an EBT card on which he received $190/month.  Additionally, Jerry received grant money from a local vocational college that covered his re-training expenses. Outside of this, Jerry has no other source of income and is fully dependent on his dear mother for shelter, transportation, and all other personal necessities.

So, can Jerry’s mother claim him as a dependent?

The answer is yes; HOWEVER… If Jerry’s mother claims him as a dependent, Jerry must now file taxes on his “unearned income”.  If she does not claim his as a dependent, then Jerry is not required to file taxes.

If you read IRS Publication 929 you will find this section:

A dependent who has only unearned income must file a return if the total is more than the amount listed in the following table.

Single
Under 65 and not blind	$ 950
Either 65 or older or blind	$2,400
65 or older and blind	$3,850
Married*
Under 65 and not blind	$ 950
Either 65 or older or blind	$2,100
65 or older and blind	$3,250

Jerry’s cash aid (his EBT card benefit) is considered unearned income because it is revenue given to him for which he did not work or exchange a product or service to earn.  Jerry is a single man, age 29; which means his unearned income cannot exceed $950 for the 2011 tax year.  But as you recall, his EBT monthly provision is $190.00.

$190 x 12 = $2,280.  So Jerry’s unearned income exceeds the $950.00 ceiling.

As far a Jerry’s training grants are concerned, they could possibly be considered unearned income as well, depending on the actual source and amount of the grant.

The way I see it, Jerry’s mom would get a few dollars more by claiming Jerry as a dependent, but then the IRS would just turn around and recover a portion of it from Jerry – who we already know doesn’t have it to pay.  My recommendation is to just let this sleeping dog lie.  What do you think?