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If your parents can qualify as your dependents, you shouldn't need to be concerned about fair market rents, gifting or a schedule E. Like minor children, they would be your dependents that you could claim as dependents on your tax return. And if they require dependent care and you are working, you may also be eligible for the dependent care credit.


Six Criteria for Qualifying Relatives (my adds are in italics)

1. The dependent cannot be a qualifying child/parent of another taxpayer.
2. The dependent earns less than the personal exemption amount during the year. For 2013, this means the dependent earns less than $3,900.this is gross income, for which Social Security would not count
3. The taxpayer provides more than half of the dependent's total support during the year.
4. The taxpayer is related to the dependent in certain ways.
5. If the dependent is married, the dependent cannot file a joint return with his or her spouse.except to get a refund of any withholdings or estimated tax payments
6. The dependent must be a citizen or resident alien of the United States, Canada, or Mexico.

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