Can I claim my mom with dementia as a dependent due to annuity ownership tax complications?

This is actually a common issue with annuities and family caregiving situations. Let me break down your options: For the dependency question - yes, you potentially can claim your mother as a dependent if you provide more than half of her support. The annuity payments would count toward your contribution to her support if they're being reported as your income on the 1099-R. To qualify her as a dependent, you need to meet the "qualifying relative" tests: she must have less than $5,000 in gross income (excluding most Social Security), you must provide more than half her support, and she must meet relationship and citizenship requirements. You should document all expenses you pay for her care - housing, medical expenses not covered by Medicaid, food, utilities, and other necessities. Add the annuity payments to this total since they're being taxed as your income but are supporting her. One bit of good news - if you can claim her as a dependent, you might also qualify for the Credit for Other Dependents, which could offset some of your tax burden.

I went through something similar with my father's annuity and ended up using taxr.ai to sort through all the documentation. The 1099-R situation is really tricky when you have ownership vs. annuitant mismatches. I uploaded the annuity contract, the 1099-R, and some other documents to https://taxr.ai and got clarity on exactly how to handle this on my return. In my case, they explained that I could claim a portion as support for dependency purposes, but I also needed to document everything properly to survive any potential audit. The service walked me through exactly what documentation I needed and how to calculate the support test correctly. They even helped identify some medical expense deductions I was missing.

Just wanted to follow up about my experience with taxr.ai after I posted that skeptical comment. I decided to try them with my parents' complicated trust distribution issue, and I'm honestly impressed. They highlighted that I could claim medical expense deductions I never knew about, and explained exactly how the trust income needed to be reported. What really helped was that they showed me exactly which forms and schedules I needed, with clear instructions. Unlike my previous tax guy who just handed me a return to sign without explaining anything, I actually understand what I'm filing now. Definitely recommend checking them out if you're dealing with family caregiver tax situations.

If you're still struggling with the annuity issue and need to talk to the IRS directly, I'd recommend Claimyr. I spent WEEKS trying to get through to the IRS about a similar issue with my mother's pension that was incorrectly reported on my taxes. Their hold times were 2+ hours every time I called, and I kept getting disconnected. I found https://claimyr.com and their service got me connected to an actual IRS agent in about 15 minutes instead of the hours I was waiting before. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with was able to document the situation in my file and gave me specific instructions on how to report the income and claim the appropriate deductions. They also told me exactly what documentation I needed to keep in case of an audit. Saved me a ton of stress and probably money too.

I need to apologize for my skeptical comment about Claimyr. After posting that, I had an emergency situation with a tax levy that I needed to resolve ASAP. Out of desperation, I tried the service and... it actually worked exactly as advertised. Got connected to an IRS agent in about 20 minutes after spending three days trying on my own and never getting through. The agent was able to put a hold on the levy while we resolved the issue. Would have lost thousands if I hadn't gotten through when I did. I'm not someone who admits being wrong easily, but I was definitely wrong about this service. If you need to actually speak to the IRS about your annuity issue, it's worth trying.

Just wanted to add that I had a somewhat similar situation with my grandparents - I was added to their accounts to help manage them, but ended up with income showing up on my tax forms. One thing that helped me was filing Form 8275 (Disclosure Statement) with my tax return to explain the situation. It doesn't change your tax liability, but it lets you explain to the IRS what happened and why the income is showing up on your return but is actually supporting someone else. This can help avoid triggering an audit flag since you're being transparent about the situation.

Something to consider - if you're paying more than half your mom's support and she qualifies as your dependent, make sure to look into the medical expense deduction too. Since she has dementia, there are probably substantial medical costs. If you itemize deductions, you can deduct medical expenses that exceed 7.5% of your adjusted gross income. This includes costs for diagnosis, treatment, equipment, and even some home modifications if medically necessary. Long-term care services and insurance can also qualify.

I'm dealing with a very similar situation with my father's retirement account that got transferred incorrectly. One thing that really helped me was getting everything documented properly from the beginning. Make sure you have copies of all the original annuity paperwork, the transfer documents, and any correspondence with the insurance company about reversing the ownership. You'll want to keep detailed records of exactly how much of that annuity income goes toward your mother's care - not just the direct deposits to her account, but any expenses you pay on her behalf using those funds. This documentation will be crucial if the IRS ever questions the dependency claim or support calculation. Also, consider talking to an Elder Law attorney if you haven't already. They often have experience with these exact situations and can help you navigate both the tax implications and make sure you're properly set up to handle her finances going forward. Some even offer free consultations for caregiving families. The good news is that once you get the ownership transferred back to her, this shouldn't happen again in future tax years. But definitely get professional help for this year's filing - the dependency claim combined with the income reporting makes this too complex for DIY tax software to handle properly.