Woulld it be better to include my mom's contribution to the household as rent or income?

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My mom gives me a monthly amount equal to 1/4 of our fixed living expenses (mortgage, utilities, food, etc.) She has a MIL suite in our house. Should we file Schedule E and claim the income as rent and take the depreciation deduction for 1/4 of our living area, or should we claim the income as caregiving income? She doesn't have much taxable income, just CD dividends, the rest is non-taxable VA disability pension and SS. Not sure at this point if we can claim her as a dependent or not this year. Year before last we could, last year we couldn't. The main reason I want to even claim the income is so that should she need Medicaid in the future, I don't want her penalized for "gifting". She is able, and should, pay her share of expenses, but not sure how to handle it tax-wise. Yes I know I should probably hire a CPA but I was just seeing if anyone else is in the same situation and has any light to shed on what I should expect. Thanks!

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My disabled adult son lives at home. Our account advised us to no longer claim him as a dependent and to call his contribution to household expenses "shared expenses" rather than "rent" so we wouldn't have to consider it income. That said, we do not have to worry about Medicaid look-backs etc. You should definitely get advice from an accountant and perhaps even Medicaid to avoid any violations that may effect your mothers eligibility. I think Pamstegmas advice regarding a written contract is an excellent starting point. When considering the dollar amount our son would pay we had to get final approval from a judge. This involved a complete break down as to how we came up with the dollar amount charged - house payment, insurance, food budget, cable bill, phone bill etc and what portion of each of these costs and why. For instance my son is non-verbal and doesn't use the phone but I conduct a small amount of business regarding my son and his care by phone - resulting in only a minor fraction of the phone bill being a part of my sons "shared expense". I always follow the adage "better safe than sorry" so if I were you, Id definately cover all my bases by starting out with professional advice on how best to proceed with this.
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You need a written contract and detailed records with receipts. Medicaid has often insisted cost-sharing was a gift because there was no contract. Avoid claiming her as a dependent; especially if she is cost-sharing.
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Well, if the funds are for more than rent and include caregiving, it seems to me that claiming it's all rent would be highly inappropriate.

I do agree that this is an issue for a CPA.
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