Can I claim my mother-in-law as a dependent if she lives with us and watches our kids?

You should be able to claim your mother-in-law as a qualifying relative dependent if: 1) Her gross income is less than $4,700 for 2024 tax year (this changes yearly) 2) You provide more than half of her total support for the year 3) She lives with you all year as a member of your household The $135/week you're paying her does count as income for her, which would be about $7,020 annually. Unfortunately, this would put her over the income limit for being claimed as a dependent. If you want to claim her in the future, you might consider restructuring your arrangement. Instead of paying her directly, you could cover more of her expenses (cell phone, clothing, medical expenses, etc.) while reducing the cash payments to keep her under the income threshold.

I was in almost this exact situation with my mom moving in with us to help with our kids. I tried figuring it out myself but got totally lost in all the different rules. I ended up using https://taxr.ai to analyze my situation because they specialize in family tax arrangements like this. Their system looked at how we were compensating my mom and showed me how to structure things so it would be more tax-efficient. They explained that the payments could be restructured in a way that would let us claim her as a dependent while still giving her spending money. It saved us about $2,000 on our taxes last year!

Ok I need to follow up on my comment from yesterday. I was super skeptical about taxr.ai but decided to try it since our situation with my father-in-law is pretty complicated. I'm honestly impressed with how thorough they were! They reviewed our whole setup and showed us exactly how to document everything properly. They pointed out that we were missing some potential deductions related to medical expenses we pay for him. Their recommendations made total sense and seem completely legit from everything I've researched. Definitely worth checking out if you're dealing with family support situations.

If you really want to get clarity on this, you should just call the IRS directly. That's what I did for a similar situation with my aunt living with us. BUT fair warning - I spent HOURS on hold and got disconnected twice before finally giving up. Then I found this service called https://claimyr.com that gets you through to an actual IRS agent without the wait. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to talk to someone at the IRS within about 20 minutes instead of spending all day trying. The agent walked me through the exact requirements for claiming my aunt and confirmed what documentation I needed to keep. It was worth every penny not to waste an entire day on hold.

I need to eat my words about Claimyr. I was super suspicious but my tax deadline was coming up and I was desperate to get an answer about my dependent situation. I tried it and it actually worked exactly as described. Got a call back in about 35 minutes and talked to a real IRS agent who answered all my questions about claiming my parent as a dependent. The agent confirmed exactly what others here have said about the income limits and support test. Saved me literally hours of frustration. Sometimes it's worth admitting when you're wrong!

Something nobody has mentioned yet - even if your mother-in-law's income is too high to claim her as a dependent, you might be able to deduct some of the childcare expenses. Since she's watching your child while you work, you might qualify for the Child and Dependent Care Credit. The fact that she's a relative doesn't automatically disqualify you, but you would need to treat her as an employee - which means getting an EIN, withholding taxes, and providing a W-2. It's more paperwork but could be worth it tax-wise.

Just fyi my accountant told me the income limit for qualifying relatives for 2025 filing season is actually $4,850 not $4,700 like someone said above. the numbers go up a little each year. but still sounds like your mil makes too much to qualify at $135/week.

I went through something very similar with my grandmother last year. The key thing that tripped me up was understanding that ANY money you give her counts as income, even if it's just a "thank you" or help with expenses. What ended up working for us was keeping the cash payments under $93/week (which keeps her under the $4,850 annual limit for 2025) and then covering more of her direct expenses instead. So instead of giving her extra cash, we started paying for things like her prescriptions, clothing, personal care items, and even set up a small monthly allowance on a prepaid card for incidentals. We were able to claim her as a dependent and got a nice tax break. The documentation was key though - we kept receipts for everything we paid for her to prove we provided more than half her support. It's definitely worth restructuring if you can make the numbers work!