I have a financial question about taxes. Can I claim this on my tax return?

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I have a financial question about taxes. Can I claim this on my tax return?

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Hi everyone,
I am looking for an answer to a tax question. My Mother who has been living with me since December of 2020 is on SS widow benefits and has been since my Father past away in 2009. She is under the tax bracket where she does not file taxes any longer and has not since 2009. She sold her home last July and we opened a joint savings account with the proceeds from the sale of her home for safe keeping and to have for her long term care. Since my Mother does not file taxes and has earned interest on the money which needs to be reported and claimed on a tax return. Can I just claim that on my tax return when I do my taxes, since it's a joint account? I would think that as long as the government is getting their money it should not matter as long as the taxes are being paid on any interest earned. Thanks!

Financial Planning Multi-generational Living Taxes

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If the account that earned interest is a joint account, the interest would have been reported under the ss number of whoever is listed first on the account. So, if your mother is listed first, even if you put the interest on your tax return, the IRS couldn't "know" that this was the same interest reported under your mother's name and ss number. Are you claiming your mother as a dependent on your tax return? If not, and if you did not get stimulus payments for her, it would be well worthwhile filing taxes for her for 2020 and 2021 because she is entitled to the payments ("recovery rebate credit"). If you use tax prep software, there's a place where it asks if the payments have been received and you'd check "no" for your mother. Here's some information from the IRS about how "non filers" can get the payments. https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

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She did receive her stimulus when they were sent out. I didn't know that my husband and I could claim her. If we can claim her will that help with my concerns?

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Oh, oh. I think you need expert advice here. Your Mother-in-law's money from sale of her home should be in HER name even if you are POA and can pay her bills on it, even if you are POD as beneficiary. It should not be in both your names. And whomever is the taxpayer ID on that account? Well that is that person's account. The proceeds of the sale of the home, if capital gains, if over a certain amount, if not fitting the IRS rules for exempt, needs reporting. And heaven FORBID you claim your MIL assets as yours on any legal paper or with any legal entity.
You need to get yourself right now to a GOOD CPA and find out what to do herre. This should NOT be a joint account. These are your Mother's assets. You are lacking in a lot of information that could have SERIOUS LEGAL and FINANCIAL repercussions for both YOU and you Mom.

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I had to put the money in a savings account where I could access the account for her medical. She has a gambling problem and has lost 50,000.00 dollars from my fathers life insurance when he passed away. I am not in anyway using any of the money for myself. I only opened the account with her. I am not her POA and am trying to figure out how I get that, because her dementia is progressing rather fast. The account is for her long term care, should I need to place her in a long term memory care facility or self pay for home health care. I am feeling lost and really don't know what to do anymore.

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I would call the IRS and ask. Depending on the amount, it may be tax free.

My dad sold a property and we set it up for him to finance the balance. He didn't have to claim the interest income because it didn't put him over a certain additional income bracket.

You can have a joint account, you just don't want to co-mingle your money with moms. That's when it becomes an issue for Medicaid. Your assets won't be counted on the application.

If you are concerned about this, you can get the application and review it and get everything clarified and set up according to the application.

If mom isn't able to understand what a DPOA and DMCPOA are in the moment of signing, your only other option is guardianship, mom's money would pay for this. However, a doctor that says she needs more care, facility care, carries a lot of weight for moving someone into a facility.

If her symptoms are new, she should be checked for a UTI. They can make dementia symptoms way worse.

Best of luck getting this sorted.

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Thank you for being kind. I will talk with a tax person and also call the IRS. I appreciate your time.

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What kind of interest is she getting? I got $18 on my checking acct in interest. We closed our savings account because we were getting hardly anything.

If all your Mom receives is SS, I doubt the interest on that account will take Mom over the 14,250 listed below. There is no need to file. My Mom received 1500 a month in SS and 200 a month in pension. She did not have to file because that pension did not take her over the 14k listed nor did any interest she incurred.

"If you are at least 65, unmarried, and receive $14,250 or more in non-exempt income in addition to your Social Security benefits, you typically must file a federal income tax return (tax year 2021).

• Regardless of your filing status, if the sum of half your Social Security plus your adjusted gross income plus your tax-exempt interest and dividends exceeds $25,000 (or $32,000 if you are married filing jointly), then a portion of your Social Security benefits are included in gross income."

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The amount she earned since July was only 77.00. The money that she made on her home was not above the amount where she would need to pay capital gains tax.

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CSimmers,

Please know that Alva is not trying to make you feel stupid. Information on the proper process should be readily available, but it is not.

She is pointing out that you and your mother have created a situation that could and likely will bite you hard in the backside. You did not do so out of stupidity, but because you and your Mum do not know the ramifications of co-mingling funds.

Now you are saying she is no longer competent to make decisions, which opens a whole new set of problems as she did not assign POA when she was competent.

You are not the first, nor the last to get yourself into a situation that will have significant ramifications down the road, especially as you said Mum also paid to have an addition built on your home.

What can happen? Medicaid has a 5 year look back period. If Mum needs Medicaid services, they will look at all her financial transactions for the previous 5 years. If they flag any of them, such as funds being put in to a joint account, additions being build ona house she does not own, there will be a spend down period, where they do not cover the costs of service.

If you could turn back time, Mum should have assigned your POA over finances and healthcare when Dad died. The funds from the sale of the house should be in an account in her name only that you can write cheques off of as POA. You could limit her access to the funds to limit her ability to gamble.

So what do you do now? Document everything, every penny into and out of the joint account. Find out from your State's Medicaid Office their guidelines and ask how to fix this situation. Talk to a CPA Tax Specialist about Mum's taxes and the interest. Talk to an Eldercare Attorney about next steps. You may have to apply for guardianship.

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Tot, they did NOT do any addition.

She said as we were going to and then said it was decided against.

The money is being held safely for mom's long term care needs.

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Your local Area Agency on Aging may have legal and tax help freely available to you, as well as Adult day care and respite care help and information.

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There is information on IRS.gov to assist you in determining whether you can claim your mother as a dependent. https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent This year may not be the year to do that.

The sale of the home will generate a Form 1099-S. This income is reportable on a return if it's greater than the filing requirement income over $14,250. The sale may not be taxable, but, it is reportable. Also, because of the pandemic payouts, it may be beneficial to file a return for your mother, https://www.irs.gov/about-irs/filing-a-2020-tax-return-even-if-you-dont-have-to-could-put-money-in-your-pocket

VITA/TCE are programs sponsored by the IRS that provide free tax services for taxpayers. The volunteers are certified and are a wonderful resource. TCE is generally supported by AARP; TCE specializes in tax issues of the elderly. To find additional information and a site near you, go to https://www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers

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Why it maybe better to file a tax return is to let the IRS know that she is still alive and to see if someone is using her soc sec number. I recommend this to my clients all the time even if they only have soc sec coming in. Social Security isn't taxable unless you have earned income of $14250 for single 65 or older(meaning wages W-2 or retirement income 1099-R or the sale of stocks and bonds).

The best is for both of you to go to an AARP tax aid site they can help you with the taxes both of you. And its free. Free e-filings of both federal and state.

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Seems you would have to claim your half of the money as taxable income unless it is low enough to be claimed as a "gift" from your mom to you.

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I think that there is no "his half" to this money, Taarna. As he describes it he is attempting to keep this money safe from Mom's gambling problems and habits. My concern here is for the future. Any questions of "whose money is this" is going to get very muddy, esp. if Mom ever requires care in future through any governmental programs. Was my reason for suggesting he see a professional attorney or CPA. He isn't the POA. This money should not be in a joint account, IMHO, and could be very problematic in the future.

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I think the best thing you can do is talk to an CPA who specializes in eldcare and to an certificed eldercare attorney who can talk to you about DPoA (which if Mom has been dx'd with dementia you may not be able to secure at this time)and point out the navigation points of Medicaid should you need to avail yourself of it's benefits for Mom's care in the future. You definitely don't want her funds in a joint checking account with your name on it.

Good luck on this journey

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Since she had a special event in 2021 (the sale of her house), you should have an accountant file taxes for her this year. You were not the owner of the house. It shouldn't go on your return. An accountant can also advise you on how to save tax dollars if there were capital gains on appreciated value of the house.

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CSimmers, w/o denigrating the advice of anyone else, this is definitely a question for IRS, or a tax accountant. I've read your post 3 times and still couldn't provide an answer which I think would adequately address your situation.

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If she has capital gains on the sale of the house, then she has to file a tax return. The fact that the money is in a joint account now is irrelevant. The tax is on the sale of the property that I assume wasn't in your name.

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No capital gain as she took quite a LOSS.

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If your mom has dementia, she can’t be driving or gambling.
That makes her “gambling problem,” a moot issue.
It sounds like your looking for an excuse to co-mingle her money with yours, imo.
My now deceased mother had dementia, needed a wheel chair and oxygen.
I was her POA, then conservator/trustee.
I accessed her account to pay assisted living bills.
I sold her home and the money went into HER account that was a “trust.”
I would never think to co-mingle her money with mine.
No probate lawyer will condone that.
You need a probate lawyer because your mom never legally assigned anyone, and now it needs to be decided by a probate judge.
The probate judge got involved only when greedy family wanted her moved home.
Her lawyer called for the hearing, because he knew she needed (2) aides that long term care would not cover.
She gets a lawyer too, fyi.
The court will assign a GAL, since she has dementia.
Good luck.
What a mess.

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Hi Kristine,

You make an EXCELLENT point that is not emphasized enough on this website or others. As soon as we knew there was something "wrong" with my sister - before there was any diagnosis of Alzheimers (they thought it might have been depression) our attorney created a Power of Attorney for me for medical and for financial matters. My sister was still enough with it to sign these and, thankfully, no one in the family disputed it way back then, especially because it was before the ALZ diagnosis. This paved the way for me to handle EVERYTHING of hers, whether it was bank accounts, credit cards, frequent flier miles (!), medical decision-making, tax-filing, etc. He also updated her will and created a trust so that we could avoid probate when she eventually passed away. Getting these things done as early on as possible meant that we could GRIEVE without worrying about financial or legal matters at our doorstep...or greedy family members.

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Get yourself an Elder Law Attorney so that you don't end up in any IRS trouble.

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Attorneys aren't CPAs. This isn't their field.

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CSimmers: This query should be posed to your Certified Public Accountant. However, if there were Capital Gains on the sale of HER home, then SHE must file tax returns (federal and state). Then SHE will report the interest income on HER returns, bearing in mind interest income under a certain value does not have to be reported. See IRS.gov for that dollar amount.

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CSimmers: Additionally, she should have received any tax documents, i.e. Form 1099 and others that should show reportable income.

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I suggest that you go to a accountant that specializes in taxes. It is possible that she could be claimed as a dependent on your return. Therefore she could have been of benefit to your taxes in 2020. The house that she sold, could qualify for a home exemption, and your mother may or may not have to pay taxes on the gain. Either way, the sale of the house should be reported to the IRS. The money that is in the joint account, you are correct, assuming that you got a 1099-INT form for the interest, it doesn’t matter who pays taxes on the money, however, it needs to be on either yours, your Mom, or both returns. The IRS may come looking if the amount of interest generated is over the minimum income that requires filing a tax return.

The free tax services will help you file taxes. However, I suggest that you go to a accountant or CPA so that you can get advice on both your mom’s taxes and your taxes to see if the fact that your Mom is living with you, can help you with your tax obligations not only for this past year, but also for future years.

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It depends SOLELY on the social security number that is on the account. It should be your mother's number. Not sure why you would want to declare this interest as income on your tax return - if you are already paying taxes - rather than file a simple EZ form for your Mom and avoid taxes altogether??? Unless there was a huge capital gain on the sale of her house, your Mom should be covered by the home owner exemption ($250,000, I believe, if she didn't have a living spouse). BTW, be sure to keep ALL receipts for caregivers, disposable panties, transportation to Doctors, etc. These are all deductible off of your Mom's future returns. I sold my sister's house when she moved in with me (very early onset Alzheimers) and invested the proceeds in her name (with someone who handles my own investments). Her investments generated money that we offset in total with these expenses...so she paid no tax. My sister passed away 3 months ago and even though she had at home care 12-14 hours a day, 7 days a week, we were able to preserve virtually all of her house proceeds nearly 4 years later, when she passed. You don't want her house proceeds to be sitting in a bank account for what may be years. Rather, you need something LIQUID that you can access when you need it to pay her caregiver bills. JUST MY OPINION; I am not a certified financial advisor.
P.S. We were NEVER going to file for Medicaid coverage for her - we knew what Medicaid "beds" in our area were like versus self-pay - if we ever needed to place her in memory care. IF You want to keep Medicaid as an option, you should really consult with an "elder law" attorney on how to structure her accounts so as to maximize her benefits.

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You say the sale of her home resulted in a capital LOSS? That’s interesting. It would be great if you could use that capital loss on your taxes. That MIGHT be possible if she were your dependent that year. She MIGHT be your dependent if, for example, you provided her with more than half of her financial support (including your labor at fair market value for cooking, cleaning and such).

Like everyone else says, see an elder law accountant.

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The sale was lower than market value as my Mom sold it to her grand daughter. The proceeds from the sale was far less than the maximum allowed before capital gain tax. The house was appraised for 180,000.00 my Mom sold it for 169,000.00. She was issued a check in the amount of 167,774.04. From what I understand, since it is less than 250,000.00 she will not have to pay capital gain taxes.

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I have a financial question about taxes. Can I claim this on my tax return?

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