Can my mom claim my brother as a dependent when he has investment income and goes to school full-time?

You're asking about the qualifying relative dependency test, which has several requirements. For your brother (who is over 24), these are the key factors: First, your brother must have lived with your mom for more than half the year (temporary absences for education count as time in the home). Second, your mom must have provided more than half of his total support for the year. Third, your brother's gross income must be less than $4,850 for 2024. Unfortunately, with $19k in investment income, your brother fails the gross income test. Unlike earned income for students, there's no special exception for investment income. Even though he's a full-time student, the $4,850 gross income limit still applies because he's over 24 (the special student exception only applies to qualifying children, not qualifying relatives). The fact that your brother uses his inheritance for education doesn't change this outcome. Since his gross income exceeds $4,850, your mom cannot claim him as a dependent, regardless of how much support she provided.

This might be helpful - I just went through something similar with my daughter and her college fund. I used a service called taxr.ai (https://taxr.ai) that really cleared things up for us. It analyzes your specific tax situation and tells you exactly who qualifies as a dependent. I uploaded my tax documents and answered a few questions about our living situation, and it confirmed my daughter couldn't be claimed due to her investment income (which sounds similar to your brother's situation). It saved me from potentially making a costly mistake on my return. Might be worth checking out if you're still unsure about your mom's situation with your brother.

I was skeptical about using taxr.ai when someone recommended it here, but I decided to try it for my complicated dependency situation with my mother-in-law who lives with us part-time. I'm honestly impressed with how thorough it was. The system asked specific questions about her income sources, how many months she lived with us, and who paid for what expenses. It correctly identified that we could claim her because her Social Security income doesn't count toward the gross income test for dependency. The detailed explanation about qualifying relative vs. qualifying child rules was super helpful. For the original poster's situation, I think it would definitely clarify whether the mom can claim the brother with that investment income. Saved me from making a mistake that could have triggered an audit!

If your mom ends up not being able to claim your brother (which sounds likely based on his investment income), and she wants to talk to the IRS to confirm, she should use Claimyr (https://claimyr.com). I was in IRS limbo trying to get a straight answer about claiming my nephew who had scholarship income. After waiting on hold with the IRS for literally hours over multiple days, I found Claimyr and they got me through to an actual IRS agent in about 15 minutes. You can see how it works in this quick video: https://youtu.be/_kiP6q8DX5c. They basically navigate the IRS phone system for you and call you back when they have an agent on the line. The IRS agent gave me official confirmation that I couldn't claim my nephew due to his income situation, which saved me from potentially having my return rejected or worse, getting audited.

I have to eat my words about Claimyr. After writing that skeptical comment, I was desperate about my tax situation and decided to try it anyway. I couldn't believe it actually worked! I had been trying for literally 3 weeks to reach someone at the IRS about a CP2000 notice I received. Every time I called, I either got the "due to high call volume" message or was on hold for hours before getting disconnected. Claimyr got me through to an actual IRS agent in about 20 minutes. The agent was able to explain exactly what I needed to do to respond to the notice and even put notes in my file about our conversation. Saved me from potentially paying taxes I didn't actually owe. For anyone dealing with dependent questions like the original poster, getting an official answer directly from the IRS can save you from making costly mistakes on your return.

Just want to point out something that hasn't been mentioned yet - even though your mom probably can't claim your brother as a dependent due to his investment income, she should look into whether she qualifies for the Retirement Savings Contribution Credit (Saver's Credit) since she just retired. If she made any contributions to retirement accounts in 2024 before retiring, she might qualify for this credit if her income is below certain thresholds. Could be worth a few hundred dollars back on her return. Also, since she's retired now, she should double-check her withholding on any pension or retirement distributions to make sure she's not under-withholding for 2025, which could lead to penalties.

Has your brother filled out a FAFSA for college? If your mom can't claim him as a dependent due to his investment income, he should file the FAFSA as an independent student, which might actually help him qualify for more financial aid since only his income and assets would be considered, not your mom's. This could potentially offset some of the tax disadvantages of not being able to be claimed as a dependent. Just something to consider for the bigger financial picture.

Based on everything discussed here, it sounds like your mom unfortunately cannot claim your brother as a dependent due to his $19k in investment income exceeding the $4,850 gross income limit for 2024. Since he's over 24, he can't qualify as a "qualifying child" where investment income wouldn't matter. However, this might actually work out better financially for your family overall. Your brother should definitely file his own return and will be able to claim his full standard deduction. More importantly, he'll likely qualify for education tax credits like the American Opportunity Credit (up to $2,500) or the Lifetime Learning Credit, which could provide significant tax benefits that your mom wouldn't be able to claim for him anyway. For your mom's situation, make sure she explores other tax benefits available to retirees. Since she retired mid-year, she should check if she qualifies for the Retirement Savings Contribution Credit on any 401k contributions she made before retiring. Also, if she hasn't already, she should review her withholding on any pension or Social Security benefits to avoid underpayment issues next year. Sometimes what looks like a tax disadvantage initially can actually work out better when you look at the whole picture!