How do I know if I can claim my in-laws as dependents on taxes?

The question you're asking is about "gross income" for dependency purposes, and foreign pensions can be tricky. For dependency tests, gross income generally includes all income that's not specifically excluded by the tax code. Even though there's a tax treaty that determines where the pension is taxed, that doesn't automatically exclude it from being counted as income for the dependency test. Foreign pensions typically still count as gross income for determining dependency status, even if they're exempt from US taxation through a treaty. The $5,050 limit (for 2024) you mentioned is correct, and if their pension income exceeds that amount, they likely won't qualify as dependents regardless of how much support you provide. However, there are some exceptions if they're permanently and totally disabled. You might want to verify the exact amount of their pension because that's the deciding factor here. If it's definitely over $6,000, they probably won't qualify as dependents under current IRS rules.

I went through something similar with my in-laws last year and found this amazing service called taxr.ai (https://taxr.ai) that saved me tons of headaches. My situation was with parents who had foreign rental income, and I couldn't figure out if they qualified as dependents. I uploaded the foreign pension documents and tax treaty info to taxr.ai, and they analyzed everything and gave me a clear answer within minutes. They even provided specific IRS references explaining why certain foreign income counts toward the gross income test regardless of treaty status. Totally worth checking out since foreign income situations can get complicated quickly!

Just wanted to follow up about taxr.ai that I asked about earlier. I decided to try it with my Canadian pension situation, and wow, it actually worked amazingly well! I uploaded the pension statements and tax forms, and they broke down exactly how the US-Canada tax treaty affected dependency status. Turns out I was calculating the gross income wrong all these years - they showed me that certain portions of the Canadian pension were actually excludable under a specific treaty provision I didn't know about. This actually pushed my parents under the threshold so I could claim them! They even provided the exact IRS publication references so I could document everything if I get audited.

If you're struggling to get clear answers from the IRS about how foreign pensions count toward dependency tests, you might want to try Claimyr (https://claimyr.com). I was in your exact situation last year - foreign pension, tax treaty questions, not sure if I could claim my father-in-law. I spent weeks trying to get through to the IRS with no luck. Then I used Claimyr, and they got me connected to an actual IRS agent within 45 minutes! You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c. The agent clarified that while the treaty meant no US tax was owed, the pension still counted as gross income for dependency purposes in my case.

OK I need to eat my words from my skeptical comment earlier. After seeing all the responses, I decided to try Claimyr for my own tax question about foreign income. I couldn't believe it actually worked! Got connected to an IRS agent in about 30 minutes when I had previously wasted an entire afternoon on hold. The agent confirmed that for dependency purposes, you have to look at the specific wording of your tax treaty. In my case (with UK pensions), the pension income DOES count toward the gross income limit even though it's not taxed in the US. But she mentioned that some treaties have special provisions for certain types of income. So the answer really depends on which country your in-laws are from and the specific treaty language.

Something no one has mentioned yet - you should also check if your in-laws meet the "member of household" test if they live with you year-round. Sometimes that can make a difference with the dependency requirements. Also, don't forget to look at the support test - you need to provide more than 50% of their support for the year.

Have you considered filing as "married filing separately" and having your spouse claim them? The rules can sometimes work differently depending on filing status. With MFS, sometimes the income limits work differently.

I've been following this thread and wanted to add something that might help clarify the situation. I work in tax preparation and see this scenario fairly often with clients who have foreign in-laws. The key thing to understand is that for dependency purposes, the IRS looks at gross income from worldwide sources, regardless of where it's taxed. So even though your in-laws' pension is taxed in their home country due to the tax treaty, it still counts toward the $5,050 gross income limit for 2024. However, there are a few things worth double-checking: 1. Make sure you're looking at the gross pension amount before any foreign taxes are withheld 2. Some tax treaties have specific provisions about what constitutes "income" for dependency purposes - though this is rare 3. If either parent has any disability status, there might be exceptions to the gross income test Given what you've described (pension over $6,000), they likely won't qualify as dependents under the gross income test. But definitely verify the exact pension amount first, and consider consulting a tax professional who specializes in international tax issues since treaty provisions can be complex. The support test sounds like you'd easily meet it, and the relationship test is satisfied since they're your in-laws. It's really just that income threshold that's the barrier here.