Dependent Children
The "Working Families Tax Relief Act of 2004" ("WFTRA") made significant changes
to the rules for determining dependency and other child-related tax
issues. Before that act there was a different set of rules for almost every
situation and it could drive you nuts because of the differences.
With the WFTRA Congress attempted to make the rules the
same for each tax issue, but
of course left in numerous special conditions which really does not make
them the same at all. The "uniform" definition is not so uniform.
So now it will drive you nuts because the rules
are ALMOST the same, but not quite.
In this article we are addressing only the "Qualifying Child" set of rules.
These are VERY restrictive as to who can qualify. The more general cases
are now considered a "Qualifying Relative"
and is covered in a separate article.
So just who does qualify in this category? Only the following relationships:
| son | |
step-son | |
brother | |
step-brother |
| daughter | |
step-daughter | |
sister | |
step-sister |
|
Or any of their dependents. Furthermore, an adopted child will meet these
requirements even if the adoption is not final providing that the child
has been lawfully placed for adoption with the taxpayer. A Foster Child
only meets the requirements if placed by either an authorized placement
agency or by order of a court of competent jurisdiction. (The casual foster
child provision was eliminated.)
Here are the other issues sorted as they apply.
Restrictions on age:
Dependent - under 19, or under 24 and full-time student, or disabled
Qualifying for Head-of-Household filing status - same as Dependent
Earned Income Tax Credit - same as Dependent
Child Tax Credit - under age 17
Child Care Credit - under age 13 when expenses paid or disabled
By "disabled" it is meant that the person is totally and permenately disabled.
Restrictions on residency:
Dependent - lived with taxpayer for more than half the year
Qualifying for Head-of-Household filing status - same as Dependent
Earned Income Tax Credit - lived with taxpayer for more than half the year in the US or on a US miltary base
Child Tax Credit - same as Dependent
Child Care Credit - same as Dependent
There are exceptions allowed for approved absences (e.g., away at school).
Restrictions on financial support:
Dependent - must not have provided over 50% of their own support
Qualifying for Head-of-Household filing status - same as Dependent
Earned Income Tax Credit - no restriction
Child Tax Credit - same as Dependent
Child Care Credit - same as Dependent
This is different from before where the taxpayer must have
been able to demonstrate that they paid more than 50% of the support
for the child.
The rules on citizenship have not changed. Basically the qualifying
child must be a US citizen, US national, or resident of the US,
Canada, or Mexico. For the benefits of dependency and head-of-household
filing status a nonresident alien child who is legally adopted or placed
for adoption with the taxpayer who is a US citizen or nation can qualify.
The rules on the qualifying child filing a joint return with a spouse
have not changed. This will disqualify them unless neither the child
nor their spouse would have a tax liability if they filed separately.
Another new wrinkle as we understand it is that a given individual
can meet the requirements for various tax benefits above for only one
taxpayer. That is to say, you cannot split the benefit where for example
one person claims the dependency and another person the EITC.
After all of that, there are special exceptions for divorced parents, or
for parents who were never married. Briefly, the custodial parent can waive
the right to claim the child's exemption to allow the non-custodial parent to
claim the child providing they have the required special form. The Child
Tax Credit stays with the child's exemption. The custodial parent may
still claim the EITC, child care credit, and qualify for the head-of-household
filing status providing they would otherwise be eligible using the child
as a Qualifying Child.
As in the past, there are tie-breaking rules that apply should two people
attempt to claim the same person for the benfits above.
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