Income tax advantage or disadvantage?

Question

I have a relative living in our home who gives me a set amount each month, it includes food, gas, heat,basically everything, she has no lease and gives me cash..$400.00. She also has no job and is on a private disability plan from a insurance company. she also receives Medicaid and food stamps.

I have always done my own income tax on line, but I'm wondering if this should be done now by an accountant..what would they need to know and how could it effect either of us in a negative way?

Answer 1

The question is whether your relative is renting a room from you or whether you are living together and sharing expenses.  The former has tax consequences for you, you file a schedule E.  Taking her as a dependent may or may not affect her disability payments, and that should be carefully checked before so doing.

Answer 2

Starlight Chick and Chatsplas both got it partly right.  First, check to see if your relative can be claimed as a dependent.  What is her total income.  If all she has is disability, you may well be able to do so.  But, as Chatsplas said, check to see if dependency status affects her eligibility.  From what you say, it looks like you are living together sharing expenses, rather than lessor and lessee.  Don't pay an accountant, if you have access to the instructions for Form 1040, page 15.  

Answer 3

The only question you need to resolve is whether you can claim your relative as a dependent or not, which could be a tax advantage for you.  Read the information here to help you decide:

http://www.irs.gov/irb/2008-02_IRB/ar14....

There is additional information through the IRS website to assist you if you do a search of the site.  

Hope this helps!! Any other questions, please ask.