Dependent child
From Wikicpa
Dependent child tests
In order to claim a child as your dependent so that you can use the $3,200 exemption in 2005 and $3,300 in 2006, as well as gain other potential child-related tax breaks, the child must now meet four tests:
- Relationship test: The child must be your child, either by birth, adoption or by being placed in your home as a foster child. A dependent child also can be your brother, sister, stepbrother, stepsister or a descendent of one of these relatives.
- Residency test: The child must live with you for more than half of the year. If the youth is away temporarily for special circumstances, such as for school, vacation, medical treatment, military service or detention in a juvenile facility, these particular absences still count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was the child's home for the entire time he or she was alive during the year.
- Age test: A child must be under a certain age, depending on the particular tax benefit. For the dependency exemption, the child must be younger than 19 at the end of the year. However, a youth who was a student at the end of the year can be claimed as long as he or she is under age 24. There is no age limit where the individual is permanently and totally disabled.
- Support test: This refers to the youngster's contributions, not those of adults in the family. To qualify as a dependent, the child cannot provide more than half of his or her own support during the year.
Even after the child meets the four qualifying tests, there are two other considerations before he or she can be claimed as a dependent for exemption purposes.
- The child generally must also be a U.S. citizen, U.S. national or a resident of the United States, Canada or Mexico. An exception applies for certain adopted children.
- And if married, the child cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.
Tie-breaker guidelines
Sometimes a child can be the qualifying child of more than one person. However, since the IRS only allows one taxpayer to claim the same youngster, all eligible taxpayers must decide who will claim the child and any ensuing tax benefits.
If you can't agree and both of you list the youth on separate returns, expect the IRS to disallow one or more of the claims using the following tie-breaker rules:
- First, the agency looks at whether only one person is the child's parent. This would be the case, for example, if one credit claimant is a stepparent. The parent would get the credit.
- If both taxpayers are the child's parents, then the parent with whom the child lived the longest during the tax year would be allowed the credit. If the child lived with both separated parents for an identical amount of time, the credit would go to the parent with the highest adjusted gross income.
- Finally, if neither person is the child's parent, the IRS would then allow the credit to the filer with the highest eligible AGI.
If several children are involved in a family situation where two taxpayers may claim them, the adults can decide to share the children for tax purposes. For example, you and your three children live with your mother. You can claim one child as a dependent and your mother can claim the other two. Again, if such a sharing agreement cannot be reached, the tiebreaker rules would come into play.
What if a person used to qualify as your dependent, but under the new definition is not your qualifying child? That person might qualify as your dependent as a "qualifying relative." To claim this dependency exemption, the child cannot be the qualifying child of any other person and must meet the all the dependency tests detailed in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
Other exemption factors
A spouse is never considered a dependent. However, you can claim an exemption for your husband or wife as long as you file a joint return.
You also are allowed an exemption deduction for yourself. But if you file a return while being claimed as a dependent on someone else's 1040, the IRS warns that you won't be able to claim a personal exemption on your own return.
The exemption amount also is reduced if you make a lot of money. On 2005 returns, exemptions are whittled down if you make more than $109,475 and are a married person filing a separate return; earn over $145,950 as a single filer; make more than $182,450 as a head of household; and are married filing jointly with income of more than $218,950.
Really well-off taxpayers -- those making $122,500 more than the amounts shown for each filing status ($61,250 more for married-filing-separate taxpayers) -- get no tax exemption amount.
And remember to include the Social Security number of each person claimed as an exemption or dependent on your tax return. Without this number, the agency won't process your filing and could even disallow your claims.
