Persons to be claimed as dependents on another's tax return will not be allowed a personal exemption on their own return. "Folks Use It, You Lose It."
Personal Exemption: Married Taxpayers
1. Each Spouse Receives a Personal Exemption.
2. A married taxpayer filing separately may claim his or her spouse's personal exemption if both of the following tests are met:
a. Taxpayer's spouse has no gross income
b. Taxpayer's spouse was not claimed as a dependent of another taxpayer
Personal Exemptions: Birth or Death During Year
If a person is born or dies during the year, he or she is entitled to either a personal or a dependency (as appropriate) exemption for the entire year. Exemptions are not prorated.
Dependency Exemption: Qualifying Child Test
Residency and Filing Requirements
Eliminate Gross Income Test
Support Test Changes
Dependency Exemption: Qualifying Relative Test
Support (over 50%) Test
Under a specific amount of (taxable) gross income test
Precludes dependent filing a joint tax return test
Only citizens (residents of U.S. / Canada or Mexico) test
Relative Test ORTaxpayer lives with individual for whole year test
CARES Test: Close Relative
The child must be the taxpayer's son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or a descendant of any of these. A foster child counts.
CARES Test: Age Limit (3)
Under the age of 19
Under the age of 24 for a full-time student - attends at least part of each of five months during the taxable year. Daytime program, Night-time programs do not qualify
No age limit to totally and permanently disabled individuals
CARES Test: Residency and Filing Requirement
A child must have the same principal place of abode as the taxpayer for more than one HALF of the year. The child cannot file a joint tax return for the year (unless it was filed only for a refund claim.)
CARES Test: Eliminate Gross Income Test
The gross income test does not apply to a qualifying child.
CARES Test: Support Test Changes
Did the child NOT contribute more than one-half of his or her own support. vs the previous test of whether the taxpayer provided over on-half of the child's suppport.
SUPORT Test: Support Test & Multiple Support Agreement
The taxpayer must have supplied more than one-half (>50%) of the support of a person in order to claim him or her as a dependent. Support means the actual expenses incurred by or on behalf of the dependent.
1. Scholarships not included.
2. Social Security & Welfare included (dependent's portion - amt actually spent on dependent)
Multiple Support Agreement:
where two or more taxpayers together contribute more than 50% to the support of a person but none of them individually contributes more than 50%, the contributing tax payers, all of whom must be qualifying realtives of (or lived the entire year with) the individual, may agree upon themselves who gets the exemption.
1. A contributor must have contributed mroe than 10% of the person's support.
SUPORT Test: Under Exemption amount of (Taxable) Gross Income
A person may not be claimed as a dependent unless the dependent's gross income is less than the exemption amount.
a. only income that is taxable is included
b. non-taxable income:
i. social security (@ low income levels)
ii. tax-exempt interest income (state & municipal interest income)
iii. tax-exempt scholoarships
SUPORT Test: Precludes Dependent Filing a Joint Return
A taxpayer will lose the exemption for a married dependent who files a joint return unless the joint return is filed solely for a refund of all taxes paid or withheld for the taxable year.
SUPORT Test: Only Citizens of the United Sates or Residents of the United States, Mexico, or Canada
The dependent must be a citizen of the United Sates or Resident of the United States, Mexico, or Canada
SUPORT Test: Relative (12) + (2 Not's)
Steps & In-laws Count
NOT Foster Parents of Cousins
SUPORT Test: Taxpayer Lives With The Individual (if Non-relative) for the Whole Year
A non-relative member of a household (i.e., a person living in the taxpayer's home for the entire year) may be claimed as a dependent.
Children of Divorced Parents
General Rule: the parent who has custody of the child for the greater part of the year takes the exemption (time test). If the parents have equal custody during the year, the parent with the higher AGI will claim the exemption.
Exemption: noncustodial parent is not allowed a dependency exemption based solely upon divorce agreement. A noncustodial divorced or separated parent may claim the exemption for his or her child if the custodial parent waives the right to the exemption.