| Publication 17, Your Federal Income Tax |
2006 Tax Year |
3.
Personal Exemptions and Dependents
Exemption amount. The amount you can deduct for each exemption has increased from $3,200 in 2005 to $3,300 in 2006.
Exemption phaseout. You lose part of the benefit of your exemptions if your adjusted gross income is above a certain amount. For 2006, this phaseout
begins at $112,875
for married persons filing separately; $150,500 for single individuals; $188,150 for heads of household; and $225,750 for
married persons filing
jointly or qualifying widow(er)s. However, beginning in 2006, you can lose no more than ⅔ of the amount of your exemptions.
In other
words, each exemption cannot be reduced to less than $1,100.
This chapter discusses exemptions. The following topics will be explained.
-
Personal exemptions — You generally can take one for yourself and, if you are married, one for your spouse.
-
Exemptions for dependents — You generally can take an exemption for each of your dependents. A dependent is your qualifying
child or
qualifying relative. If you are entitled to claim an exemption for a dependent, that dependent cannot claim a personal exemption
on his or her own tax
return.
-
Phaseout of exemptions — You get less of a deduction when your adjusted gross income goes above a certain amount.
-
Social security number (SSN) requirement for dependents — You must list the social security number of any dependent for whom
you claim
an exemption.
Deduction.
Exemptions reduce your taxable income. Generally, you can deduct $3,300 for each exemption you claim in 2006. But,
you may lose part of the dollar
amount of your exemptions if your adjusted gross income is above a certain amount. See Phaseout of Exemptions, later.
How to claim exemptions.
How you claim an exemption on your tax return depends on which form you file.
If you file Form 1040EZ, the exemption amount is combined with the standard deduction amount and
entered on line 5.
If you file Form 1040A or Form 1040, follow the instructions for the form. The total number of
exemptions you can claim is the total in the box on line 6d. Also complete line 26 (Form 1040A) or line 42 (Form 1040).
Useful Items - You may want to see:
There are two types of exemptions: personal exemptions and exemptions for dependents. While each is worth the same amount
($3,300 for 2006),
different rules apply to each type.
You are generally allowed one exemption for yourself and, if you are married, one exemption for your spouse. These are called
personal exemptions.
You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If another taxpayer
is entitled to claim you
as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent.
Your spouse is never considered your dependent.
Joint return.
On a joint return you can claim one exemption for yourself and one for your spouse.
Separate return.
If you file a separate return, you can claim the exemption for your spouse only if your spouse had no gross income,
is not filing a return, and was
not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your spouse as a dependent.
This is also true
if your spouse is a nonresident alien.
Death of spouse.
If your spouse died during the year, you generally can claim your spouse's exemption under the rules just explained
under Joint return.
If you file a separate return for the year, you may be able to claim your spouse's exemption under the rules just described
in Separate
return.
If you remarried during the year, you cannot take an exemption for your deceased spouse.
If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed
as an exemption on both the
final separate return of your deceased spouse and the separate return of your new spouse for that year. If you file a joint
return with your new
spouse, you can be claimed as an exemption only on that return.
Divorced or separated spouse.
If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former
spouse's exemption. This rule
applies even if you provided all of your former spouse's support.
Exemption for Individual Displaced by Hurricane Katrina
You may be able to take an exemption amount of $500 for providing housing to a person displaced by Hurricane Katrina.
You can claim this exemption for up to four individuals. Since the exemption is $500 per person, the maximum you can claim
is $2,000. You may be
able to take this exemption for 2006 if all of the following are true.
-
You provided housing in your main home for a period of at least 60 consecutive days ending in 2006 to a person displaced by
Hurricane
Katrina.
-
The person lived in the Hurricane Katrina disaster area on August 28, 2005.
-
You did not receive rent or any other amount for providing the housing.
-
The person displaced was not your spouse or dependent.
-
You did not claim the maximum additional exemption amount of $2,000 in 2005.
You cannot claim this exemption in 2006 for a person for whom you claimed this type of exemption in 2005.
To claim this amount, file Form 8914. For more information, see Publication 4492.
Exemptions for Dependents
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even
if your dependent files
a return.
The term “dependent” means:
-
A qualifying child, or
-
A qualifying relative.
The terms “qualifying child” and “qualifying relative” are defined later.
Table 3-1. Overview of the Rules for Claiming an Exemption for a Dependent
Caution. This table is only an overview of the rules. For details, see the rest of this chapter.
-
You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.
-
You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund
and there
would be no tax liability for either spouse on separate returns.
-
You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident
of Canada
or Mexico, for some part of the year.
1
-
You cannot claim a person as a dependent unless that person is your qualifying child or qualifying
relative.
|
| Tests To Be a Qualifying Child |
Tests To Be a Qualifying Relative |
-
The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother,
stepsister,
or a descendant of any of them.
-
The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student,
or (c) any age
if permanently and totally disabled.
-
The child must have lived with you for more than half of the year.
2
-
The child must not have provided more than half of his or her own support for the year.
-
If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the
child as a
qualifying child.
|
-
The person cannot be your qualifying child or the qualifying child of anyone else.
-
The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you, or (b)
must live with you all year as a member of your household (and your relationship must not violate local law).
2
-
The person's gross income for the year must be less than $3,300.
3
-
You must provide more than half of the person's total support for the year.
4
|
| 1There is an exception for certain adopted children.
|
| 2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated
parents,
and
|
|
kidnapped children.
|
| 3There is an exception if the person is disabled and has income from a sheltered workshop.
|
| 4There are exceptions for multiple support agreements, children of divorced or separated parents, and kidnapped
children.
|
You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met.
-
Dependent taxpayer test.
-
Joint return test.
-
Citizen or resident test.
These three tests are explained in detail later.
All the requirements for claiming an exemption for a dependent are summarized in Table 3-1.
Dependent not allowed a personal exemption. If you can claim an exemption for your dependent, the dependent cannot claim his or her own
exemption on his or her own tax return. This is true even if you do not claim the dependent's exemption on your return or
if the exemption will be
reduced under the phaseout rule described under Phaseout of Exemptions , later.
Housekeepers, maids, or servants.
If these people work for you, you cannot claim exemptions for them.
Child tax credit.
You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year. For
more information, see the
instructions in your tax forms package.
If you could be claimed as a dependent by another person, you cannot claim anyone else as a dependent. Even if you have a
qualifying child or
qualifying relative, you cannot claim that person as a dependent.
If you are filing a joint return and your spouse could be claimed as a dependent by someone else, you and your spouse cannot
claim any dependents
on your joint return.
You generally cannot claim a married person as a dependent if he or she files a joint return.
Example.
You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. The couple
files a joint
return. Even though your daughter is your qualifying child, you cannot take an exemption for her.
Exception.
The joint return test does not apply if a joint return is filed by the dependent and his or her spouse merely as a
claim for refund and no tax
liability would exist for either spouse on separate returns.
Example.
Your son and his wife each had less than $3,000 of wages and no unearned income. Neither is required to file a tax return.
Taxes were taken out of
their pay, so they filed a joint return to get a refund. The exception to the joint return test applies, so you are not disqualified
from claiming
their exemptions just because they filed a joint return. You can claim their exemptions if you meet all the other requirements
to do so.
You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident
of Canada or
Mexico, for some part of the year. However, there is an exception for certain adopted children, as explained next.
Adopted child.
If you are a U.S. citizen or U.S. national who has legally adopted a child who is not a U.S. citizen, U.S. resident
alien, or U.S. national, this
test is met if the child lived with you as a member of your household all year. This also applies if the child was lawfully
placed with you for legal
adoption.
Child's place of residence.
Children usually are citizens or residents of the country of their parents.
If you were a U.S. citizen when your child was born, the child may be a U.S. citizen even if the other parent was
a nonresident alien and the child
was born in a foreign country. If so, this test is met.
Foreign students' place of residence.
Foreign students brought to this country under a qualified international education exchange program and placed in
American homes for a temporary
period generally are not U.S. residents and do not meet this test. You cannot claim an exemption for them. However, if you
provided a home for a
foreign student, you may be able to take a charitable contribution deduction. See Expenses Paid for Student Living With You in chapter 24.
U.S. national.
A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States.
U.S. nationals include American
Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.
There are five tests that must be met for a child to be your qualifying child. The five tests are:
-
Relationship,
-
Age,
-
Residency,
-
Support, and
-
Special test for qualifying child of more than one person.
These tests are explained next.
To meet this test, a child must be:
-
Your son, daughter, stepchild, eligible foster child, or a descendant (for example, your grandchild) of any of them, or
-
Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew)
of any of
them.
Adopted child.
An adopted child is always treated as your own child. The term “ adopted child” includes a child who was lawfully placed with you for legal
adoption.
Eligible foster child.
An eligible foster child is an individual who is placed with you by an authorized placement agency or by judgment,
decree, or other order of any
court of competent jurisdiction.
To meet this test, a child must be:
-
Under age 19 at the end of the year,
-
A full-time student under age 24 at the end of the year, or
-
Permanently and totally disabled at any time during the year, regardless of age.
Example.
Your son turned 19 on December 10. Unless he was disabled or a full-time student, he does not meet the age test because, at
the end of the year, he
was not under age 19.
Full-time student.
A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time
attendance.
Student defined.
To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year:
-
A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body
at the school, or
-
A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local
government
agency.
The 5 calendar months do not have to be consecutive.
School defined.
A school can be an elementary school, junior and senior high school, college, university, or technical, trade, or
mechanical school. However, an
on-the-job training course, correspondence school, or school offering courses only through the Internet does not count as
a school.
Vocational high school students.
Students who work on “ co-op” jobs in private industry as a part of a school's regular course of classroom and practical training are
considered full-time students.
Permanently and totally disabled.
Your child is permanently and totally disabled if both of the following apply.
-
He or she cannot engage in any substantial gainful activity because of a physical or mental condition.
-
A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death.
To meet this test, your child must have lived with you for more than half of the year. There are exceptions for temporary
absences, children who
were born or died during the year, kidnapped children, and children of divorced or separated parents.
Temporary absences.
Your child is considered to have lived with you during periods of time when one of you, or both, are temporarily absent
due to special
circumstances such as:
-
Illness,
-
Education,
-
Business,
-
Vacation, or
-
Military service.
Death or birth of child.
A child who was born or died during the year is treated as having lived with you all year if your home was the child's
home the entire time he or
she was alive during the year. The same is true if the child lived with you all year except for any required hospital stay
following birth.
Child born alive.
You may be able to claim an exemption for a child who was born alive during the year, even if the child lived only
for a moment. State or local law
must treat the child as having been born alive. There must be proof of a live birth shown by an official document, such as
a birth certificate. The
child must be your qualifying child or qualifying relative, and all the other tests to claim an exemption for a dependent
must be met.
Stillborn child.
You cannot claim an exemption for a stillborn child.
Kidnapped child.
You can treat your child as meeting the residency test even if the child has been kidnapped, but both of the following
statements must be true.
-
The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family
or the child's
family.
-
In the year the kidnapping occurred, the child lived with you for more than half of the part of the year before the date of
the
kidnapping.
This treatment applies for all years until the child is returned. However, the last year this treatment can apply
is the earlier of:
-
The year there is a determination that the child is dead, or
-
The year the child would have reached age 18.
Children of divorced or separated parents.
In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of
the custodial parent. However,
the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true.
-
The parents:
-
Are divorced or legally separated under a decree of divorce or separate maintenance,
-
Are separated under a written separation agreement, or
-
Lived apart at all times during the last 6 months of the year.
-
The child received over half of his or her support for the year from the parents.
-
The child is in the custody of one or both parents for more than half of the year.
-
Either of the following statements is true.
-
The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent
for the year, and
the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect
after 1984, see
Divorce decree or separation agreement made after 1984, later.)
-
A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2006 states that the
noncustodial
parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent
cannot claim the child as
a dependent, and the noncustodial parent provides at least $600 for the child's support during the year.
Custodial parent and noncustodial parent.
The custodial parent is the parent with whom the child lived for the greater part of the year. The other parent is
the noncustodial parent.
If the parents divorced or separated during the year and the child lived with both parents before the separation,
the custodial parent is the one
with whom the child lived for the greater part of the rest of the year.
Example.
Your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are
considered the
custodial parent.
Written declaration.
The custodial parent may use either Form 8332 or a similar statement (containing the same information required by
the form) to make the written
declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement
to his or her tax return.
The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all
future years, as specified in
the declaration. If the exemption is released for more than 1 year, the original release must be attached to the return of
the noncustodial parent for
the first year, and a copy must be attached for each later year.
Divorce decree or separation agreement made after 1984.
If the divorce decree or separation agreement went into effect after 1984, the noncustodial parent can attach certain
pages from the decree or
agreement instead of Form 8332. To be able to do this, the decree or agreement must state all three of the following.
-
The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
-
The custodial parent will not claim the child as a dependent for the year.
-
The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.
The noncustodial parent must attach all of the following pages of the decree or agreement to his or her tax return.
-
The cover page (write the other parent's social security number on this page).
-
The pages that include all of the information identified in items (1) through (3) above.
-
The signature page with the other parent's signature and the date of the agreement.
The noncustodial parent must attach the required information even if it was filed with a return in an earlier year.
Remarried parent.
If you remarry, the support provided by your new spouse is treated as provided by you.
Parents who never married.
This special rule for divorced or separated parents also applies to parents who never married.
Support Test (To Be a Qualifying Child)
To meet this test, the child cannot have provided more than half of his or her own support for the year.
This test is different from the support test to be a qualifying relative, which is described later. However, to see what is
or is not support, see
Support Test (To Be a Qualifying Relative), later. If you are not sure whether a child provided more than half of his or her own support,
you may find Worksheet 3-1 helpful.
Scholarships.
A scholarship received by a child who is a full-time student is not taken into account in determining whether the
child provided more than half of
his or her own support.
Special Test for Qualifying Child of More Than One Person
If your qualifying child is not a qualifying child for anyone else, this test does not apply to you and you do not need to
read about it. This is
also true if your qualifying child is not a qualifying child for anyone else except your spouse with whom you file a joint
return.
If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated
parents described
earlier, see Applying this special test to divorced or separated parents , later.
Sometimes, a child meets the relationship, age, residency, and support tests to be a qualifying child of more than one person.
Although the child
is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. To meet
this special test, you
must be the person who can treat the child as a qualifying child.
If you and another person have the same qualifying child, you and the other person(s) can decide which of you will treat the
child as a qualifying
child. That person can take all of the following tax benefits (provided the person is eligible for each benefit) based on
the qualifying child.
-
The exemption for the child.
-
The child tax credit.
-
Head of household filing status.
-
The credit for child and dependent care expenses.
-
The exclusion from income for dependent care benefits.
-
The earned income credit.
The other person cannot take any of these benefits based on this qualifying child. In other words, you and the other person
cannot agree to divide
these tax benefits between you.
If you and the other person(s) cannot agree on who will claim the child and more than one person files a return claiming the
same child, the IRS
will disallow all but one of the claims using the tie-breaker rule in Table 3-2.
Table 3-2. When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule)
Caution. If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or
separated parents, see Applying this special test to divorced or separated parents.
| IF more than one person files a return claiming the same
qualifying child and . . . |
|
THEN the child will be treated as the qualifying child of the. .
. |
|
only one of the persons is the child's parent,
|
|
parent.
|
|
two of the persons are parents of the child and they do not file a joint
return together,
|
|
parent with whom the child lived for the longer period of time during the year.
|
|
|
two of the persons are parents of the child, they do not file a joint
return together, and the child lived with each parent the same amount of time during the year,
|
|
parent with the higher adjusted gross income (AGI).
|
|
none of the persons are the child's parent,
|
|
person with the highest AGI.
|
Example 1—child lived with parent and grandparent.
You and your 3-year-old daughter, Jane, lived with your mother all year. You are 25 years old and earned $9,000 for the year.
Your mother is not
your dependent. Jane is a qualifying child of both you and your mother because she meets the relationship, age, residency,
and support tests for both
you and your mother. However, only one of you can claim her. You agree to let your mother claim Jane. This means your mother
can claim Jane as a
dependent and can claim her as a qualifying child for the child tax credit, head of household filing status, credit for child
and dependent care
expenses, exclusion for dependent care benefits, and the earned income credit, if she qualifies for each of those tax benefits
(and if you do not
claim Jane as a dependent or as a qualifying child for any of those tax benefits).
Example 2—two persons claim same child.
The facts are the same as in Example 1 except that you and your mother both claim Jane as a dependent and claim her as a qualifying
child for the
child tax credit and earned income credit. In this case, you as the child's parent will be the only one allowed to claim Jane
as a dependent and claim
her as a qualifying child for the child tax credit and earned income credit. The IRS will disallow your mother's claim to
these tax benefits unless
she has another qualifying child.
Example 3—qualifying children split between two persons.
The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both
you and your mother.
Only one of you can claim each child as a dependent. However, you and your mother can split the three qualifying children
between you. For example,
you can claim one child as a dependent and your mother can claim the other two.
Example 4—taxpayer who is a qualifying child.
The facts are the same as in Example 1 except that you are only 18 years old and did not provide more than half of your own
support for the year.
This means you are your mother's qualifying child and she could claim you as a dependent. Because of the Dependent Taxpayer Test explained
earlier, you cannot treat your daughter as a qualifying child and cannot claim her as a dependent. Only your mother can treat
your daughter as a
qualifying child.
Example 5—separated parents.
You, your husband, and your 10-year-old son lived together until August 1, 2006, when your husband moved out of the household.
In August and
September, your son lived with you. For the rest of the year, your son lived with your husband. Your son is a qualifying child
of both you and your
husband because your son lived with each of you for more than half the year and because he met the relationship, age, and
support tests for both of
you. At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written
separation agreement, so
the special rule for divorced or separated parents does not apply.
You and your husband will file separate returns. Your husband agrees to let you treat your son as a qualifying child. This
means, if your husband
does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for
the child tax credit and
exclusion for dependent care benefits, if you qualify for each of those tax benefits. However, you cannot claim head of household
filing status
because you and your husband did not live apart the last 6 months of the year. As a result, your filing status is married
filing separately, so you
cannot claim the earned income credit or the credit for child and dependent care expenses.
Example 6—separated parents claim same child.
The facts are the same as in Example 5 except that you and your husband both claim your son as a qualifying child. In this
case, only your husband
will be allowed to treat your son as a qualifying child. This is because, during 2006, the boy lived with him longer than
with you. If you claimed an
exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion
for dependent care benefits,
or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits. In addition, because
you and your husband did
not live apart the last 6 months of the year, your husband cannot claim head of household filing status. As a result, his
filing status is married
filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses
Example 7—unmarried parents.
You, your 5-year-old son, and your son's father lived together all year. You and your son's father are not married. Your son
is a qualifying child
of both you and his father because he meets the relationship, age, residency, and support tests for both you and his father.
Your adjusted gross
income (AGI) is $8,000 and your son's father's AGI is $18,000. Your son's father agrees to let you treat the child as a qualifying
child. This means
you can claim him as a dependent and treat him as a qualifying child for the child tax credit, head of household filing status,
credit for child and
dependent care expenses, exclusion for dependent care benefits, and the earned income credit, if you qualify for each of those
tax benefits (and if
your son's father does not claim your son as a dependent or as a qualifying child for any of those tax benefits).
Example 8—unmarried parents claim same child.
The facts are the same as in Example 7 except that you and your son's father both claim your son as a qualifying child. In
this case, only your
son's father will be allowed to treat your son as a qualifying child. This is because his AGI, $18,000, is more than your
AGI, $8,000. If you claimed
an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion
for dependent care
benefits, or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits.
Example 9—child did not live with a parent.
You and your 7-year-old niece, your sister's child, lived with your mother all year. You are 25 years old, and your AGI is
$9,300. Your mother's
AGI is $15,000. Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency,
and support tests for
both you and your mother. However, only one of you can treat her as a qualifying child. Your mother agrees to let you treat
the child as a qualifying
child.
Example 10—child did not live with a parent.
The facts are the same as in Example 9 except that you and your mother both claim your niece as a qualifying child. In this
case, only your mother
will be allowed to treat your niece as a qualifying child. This is because your mother's AGI, $15,000, is more than your AGI,
$9,300. If you claimed
an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion
for dependent care
benefits, or the earned income credit for your niece, the IRS will disallow your claim to all these tax benefits.
Applying this special test to divorced or separated parents.
If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced
or separated parents described
earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. However, the noncustodial
parent cannot claim the
child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion
for dependent care
benefits, and the earned income credit. Only the custodial parent or other eligible parent can claim the child as a qualifying
child for these four
tax benefits. If you and another eligible taxpayer both claim the child as a qualifying child for purposes of these four benefits,
the IRS will
disallow all but one of the claims using the tie-breaker rule in Table 3-2.
Example 1.
You and your 5-year-old son lived with your mother all year. Under the rules for children of divorced or separated parents,
your son is the
qualifying child of your ex-husband, who can claim an exemption and the child tax credit for the child if he meets all the
requirements to do so.
Because of this, you cannot claim an exemption or the child tax credit for your son. However, your ex-husband cannot claim
the boy as a qualifying
child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care
benefits, and the earned
income credit. You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying
child of both you and
your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency,
and support tests for
both you and your mother. (Note: The support test does not apply for the earned income credit.) However, you agree to let
your mother claim your son.
This means, if you do not claim your son as a qualifying child for head of household filing status or the earned income credit,
your mother can claim
him as a qualifying child for each of those tax benefits for which she qualifies.
Example 2.
The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for head of household
filing status and the earned income credit. You as the child's parent will be the only one allowed to claim your son as a
qualifying child for these
tax benefits. The IRS will disallow your mother's claim to these tax benefits unless she has another qualifying child.
There are four tests that must be met for a person to be your qualifying relative. The four tests are:
-
Not a qualifying child test,
-
Member of household or relationship test,
-
Gross income test, and
-
Support test.
Age.
Unlike a qualifying child, a qualifying relative can be any age. There is no age test for a qualifying relative.
Kidnapped child.
You can treat a child as your qualifying relative even if the child has been kidnapped, but both of the following
statements must be true.
-
The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family
or the child's
family.
-
In the year the kidnapping occurred, the child met the tests to be your qualifying relative for the part of the year before
the date of the
kidnapping.
This treatment applies for all years until the child is returned. However, the last year this treatment can apply
is the earlier of:
-
The year there is a determination that the child is dead, or
-
The year the child would have reached age 18.
Not a Qualifying Child Test
A child is not your qualifying relative if the child is your qualifying child or the qualifying child of any other taxpayer.
Example 1.
Your 22-year-old daughter, who is a full-time student, lives with you and meets all the tests to be your qualifying child.
She is not your
qualifying relative.
Example 2.
Your 2-year-old son lives with your parents and meets all the tests to be their qualifying child. He is not your qualifying
relative.
Example 3.
Your son lives with you but is not your qualifying child because he is 30 years old and does not meet the age test. He may
be your qualifying
relative if the gross income test and the support test are met.
Example 4.
Your 13-year-old grandson lived with his mother for 3 months, with his uncle for 4 months, and with you for 5 months during
the year. He is not
your qualifying child because he does not meet the residency test. He may be your qualifying relative if the gross income
test and the support test
are met.
Child in Canada or Mexico.
A child who lives in Canada or Mexico may be your qualifying relative, and you may be able to claim the child as a
dependent. If the child does not
live with you, the child does not meet the residency test to be your qualifying child. If the persons the child does live
with are not U.S. citizens
and have no U.S. gross income, those persons are not “ taxpayers,” so the child is not the qualifying child of any other taxpayer. If the child is
not your qualifying child or the qualifying child of any other taxpayer, the child is your qualifying relative if the gross
income test and the
support test are met.
You cannot claim as a dependent a child who lives in a foreign country other than Canada or Mexico, unless the child
is a U.S. citizen, U.S.
resident alien, or U.S. national for some part of the year. There is an exception for certain adopted children who lived with
you all year. See
Citizen or Resident Test, earlier.
Example.
You provide all the support of your children, ages 6, 8, and 12, who live in Mexico with your mother and have no income. You
are single and live in
the United States. Your mother is not a U.S. citizen and has no U.S. income, so she is not a “taxpayer.” Your children are not your qualifying
children because they do not meet the residency test. Also, they are not the qualifying children of any other taxpayer, so
they are your qualifying
relatives and you can claim them as dependents if all the tests are met. You may also be able to claim your mother as a dependent
if all the tests are
met, including the gross income test and the support test.
Member of Household or Relationship Test
To meet this test, a person must either:
-
Live with you all year as a member of your household, or
-
Be related to you in one of the ways listed under Relatives who do not have to live with you.
If at any time during the year the person was your spouse, that person cannot be your qualifying relative. However, see Personal
Exemptions, earlier.
Relatives who do not have to live with you.
A person related to you in any of the following ways does not have to live with you all year as a member of your household
to meet this test.
-
Your child, stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted
child is
considered your child.)
-
Your brother, sister, half brother, half sister, stepbrother, or stepsister.
-
Your father, mother, grandparent, or other direct ancestor, but not foster parent.
-
Your stepfather or stepmother.
-
A son or daughter of your brother or sister.
-
A brother or sister of your father or mother.
-
Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
Any of these relationships that were established by marriage are not ended by death or divorce.
Example.
You and your wife began supporting your wife's father, a widower, in 2001. Your wife died in 2005. In spite of your wife's
death, your
father-in-law continues to meet this test, and you can claim him as a dependent if all other tests are met, including the
gross income test and
support test.
Eligible foster child.
An eligible foster child is an individual who is placed with you by an authorized placement agency or by judgment,
decree, or other order of any
court of competent jurisdiction.
Joint return.
If you file a joint return, the person can be related to either you or your spouse. Also, the person does not need
to be related to the spouse who
provides support.
For example, your spouse's uncle who receives more than half of his support from you may be your qualifying relative,
even though he does not live
with you. However, if you and your spouse file separate returns, your spouse's uncle can be your qualifying relative only
if he lives with you all
year as a member of your household.
Temporary absences.
A person is considered to live with you as a member of your household during periods of time when one of you, or both,
are temporarily absent due
to special circumstances such as:
-
Illness,
-
Education,
-
Business,
-
Vacation, or
-
Military service.
If the person is placed in a nursing home for an indefinite period of time to receive constant medical care, the absence
may be considered
temporary.
Death or birth.
A person who died during the year, but lived with you as a member of your household until death, will meet this test.
The same is true for a child
who was born during the year and lived with you as a member of your household for the rest of the year. The test is also met
if a child lived with you
as a member of your household except for any required hospital stay following birth.
If your dependent died during the year and you otherwise qualified to claim an exemption for the dependent, you can
still claim the exemption.
Example.
Your dependent mother died on January 15. She met the tests to be your qualifying relative. The other tests to claim an exemption
for a dependent
were also met. You can claim an exemption for her on your return.
Local law violated.
A person does not meet this test if at any time during the year the relationship between you and that person violates
local law.
Example.
Your girlfriend lived with you as a member of your household all year. However, your relationship with her violated the laws
of the state where you
live, because she was married to someone else. Therefore, she does not meet this test and you cannot claim her as a dependent.
Adopted child.
An adopted child is always treated as your own child. The term “ adopted child” includes a child who was lawfully placed with you for legal
adoption.
Cousin.
Your cousin meets this test only if he or she lives with you all year as a member of your household. A cousin is a
descendant of a brother or
sister of your father or mother.
To meet this test, a person's gross income for the year must be less than $3,300.
Gross income defined.
Gross income is all income in the form of money, property, and services that is not exempt from tax.
In a manufacturing, merchandising, or mining business, gross income is the total net sales minus the cost of goods
sold, plus any miscellaneous
income from the business.
Gross receipts from rental property are gross income. Do not deduct taxes, repairs, etc., to determine the gross income
from rental property.
Gross income includes a partner's share of the gross (not a share of the net) partnership income.
Gross income also includes all unemployment compensation and certain scholarship and fellowship grants. Scholarships
received by degree candidates that are used for tuition, fees, supplies, books, and equipment required for particular courses
may not be included in
gross income. For more information about scholarships, see chapter 12.
Tax-exempt income, such as certain social security benefits, is not included in gross income.
Disabled dependent working at sheltered workshop.
For purposes of this test (the gross income test), the gross income of an individual who is permanently and totally
disabled at any time during the
year does not include income for services the individual performs at a sheltered workshop. The availability of medical care
at the workshop must be
the main reason for the individual's presence there. Also, the income must come solely from activities at the workshop that
are incident to this
medical care.
A “ sheltered workshop” is a school that:
-
Provides special instruction or training designed to alleviate the disability of the individual, and
-
Is operated by certain tax-exempt organizations, or by a state, a U.S. possession, a political subdivision of a state or possession,
the
United States, or the District of Columbia.
“Permanently and totally disabled” has the same meaning here as under Qualifying child, earlier.
Support Test (To Be a Qualifying Relative)
To meet this test, you generally must provide more than half of a person's total support during the calendar year.
However, if two or more persons provide support, but no one person provides more than half of a person's total support, see
Multiple Support
Agreement, later.
How to determine if support test is met.
You figure whether you have provided more than half of a person's total support by comparing the amount you contributed
to that person's support
with the entire amount of support that person received from all sources. This includes support the person provided from his
or her own funds.
You may find Worksheet 3-1 helpful in figuring whether you provided more than half of a person's support |
|
