My father is suffering from dementia. As a result, I must cash his monthly social security check and use the proceeds for his care. What are the resulting tax consequences?

The tax consequences of cashing your father's monthly social security check and using the proceeds for his care are as follows:

1. Taxability of Social Security Benefits: Social security benefits, including monthly retirement, survivor, and disability benefits, may be taxable depending on the total amount of your father's benefits and other income. To determine if any of the benefits are taxable, you need to compare the base amount for his filing status with the total of one-half of his benefits plus all other income, including tax-exempt interest. If the total exceeds the base amount, a portion of the benefits may be taxable.
2. Reporting Requirements: If part of your father's benefits are taxable, they must be reported on Form 1040 or 1040SR. The net benefits (the total amount from box 5 of all Forms SSA1099) should be reported on line 6a, and the taxable part on line 6b. If none of the benefits are taxable, but a tax return must be filed for other reasons, the benefits should still be reported as instructed.
3. Repayment of Benefits: If any repayment of benefits was made during the year, it must be subtracted from the gross benefits received. The net benefits after repayment are used to determine the taxable amount.
4. Lump-Sum Payments: If your father received a lump-sum payment of benefits that includes amounts for prior years, the taxable portion must be included in the income for the year received, even if it pertains to earlier years.
5. Use of Benefits for Care: The fact that you are using the proceeds from the social security checks for your father's care does not change the taxability of the benefits. The benefits are considered your father's income, and the taxability is determined based on his total income and filing status.
6. Support Considerations: When determining whether you provided over one-half of your father's support to claim him as a dependent, the social security benefits are considered funds your father paid for his own support.

In summary, the tax consequences of cashing your father's social security checks and using the proceeds for his care depend on the total amount of his benefits and other income. The benefits may be partially taxable, and the taxable portion must be reported on his tax return. The use of the benefits for his care does not alter their taxability.

Sources:
Rev. Rul. 75-145
Publication 4190 (07/2020)
Publication 915 (2023)
Publication 559 (2023)
Publication 554 (2023)
§ 86. Social security and tier 1 railroad retirement benefits