Who is Your Dependent?

Does Your Child Qualify?

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Taxpayers are allowed one exemption for each person claimed as a dependent on their tax return. An exemption in 2014 is a deduction of $3,950 barring any income phaseouts. This can equal substansive savings on taxes.  

There are two types of dependents - Qualifying Child and Qualifying Relative.  In both cases, 

• the person must be a U.S. citizen, a U.S. national, a U.S. resident, or a resident of Canada or Mexico.  
• They may not be a dependent of another person...including themselves or claim a dependent on their tax return.  
• They may not file a married tax return unless the reason they filed was to claim a refund and no tax liability existed.

If your dependent passed these tests...hurray!  You are one step closer claiming your dependent.

In addition to the qualifiers above, to claim a dependency exemption, the following must be true:

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Qualifying Child:

• Relationship:  The child must be your son, daughter, stepchild, placed foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them.
• Age: The child must be age 19 or younger.  If the child is a full-time student, age 24 or younger.  The age test does not apply to a child who is permanently and totally disabled.
• Residence:  The child must have the same principle residence as you for more than half the year (183 days to be exact!). There are exceptions for children of divorced/separated parents, kidnapped children, temporary absences and for children who were born or pass away during the year.
• Support: The child may not provide more than half of his/her support.

If the child is the qualifying child of two or more taxpayers, the child will be the qualifying child of:

1. The child's parents.
2. If more than one parent, the one in which the child lived the longest during the year.
3. If the time was equal, then the parent with the highest adjusted gross income.
4. If no parent, the taxpayer with the highest adjusted gross income.

Children of divorced/separated parents have another set of qualifiers.  The noncustodial parent can claim the child if:

• The parents are divorced, separated legally, separated under written agreement or lived apart for the last six months of the year.
• The child received over half of his/her support for the year from the parents.
• The child is in the custody of the parents for more than half of the year. 
• The custodial parent signs Form 8332.

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If these qualifiers are met, you have determined that you are eligible to claim the child as a dependent on your tax return.  In addition to the $3,950 in exemption, you may also be able to take advantage of the child tax credit, earned income credit, head of household filing status, and the credit for child and dependent expenses. 

Qualifying Relative:

• The person must not be your qualifying child.
• The person must live at your residence for the entire year. There are exceptions.  Please see Publication 501 under the section "Relatives who do not have to live with you."
• The person’s gross income must be less than the personal exemption amount for the year ($3950). 
• You must provide over half of the person’s support for the year. 

That is it!  Easy peasy!! Don't forget, each person on your tax return must have a valid TIN (taxpayer identification number).  This can be an ITIN (individual taxpayer identification number) or and SSN (social security number).  

For more information, please review IRS Publication 17 and Publication 501.

Google Images:  1.  www.apps.irs.gov.com, 2. www.onesmedia.com, 3. www.senatorandrewlanza.com

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This blog is not meant to offer legal or comprehensive advice.  You should consult a tax professional for questions regarding your unique situation.