Question

3) Give an example of a situation where a taxpayer's child can be considered a dependent of the taxpayer through the qualifying relative rules, but will not qualify through the qualifying child rules. 4) Review the tests for "support" in the text. There is a subtle, yet important, difference in the way support is considered in order to be a "qualifying child" versus a "qualifying relative." What is that difference? 5) Divorced parents are in the situation of having to determine which one of them is entitled to consider the child(ren) as a dependent. Each child can only be a dependent of one of the parents (if the parents are not married filing jointly with each other). According to the tax code which parent is entitled to claim the dependent child for purposes of filing status? Are there any legitimate means of overriding the tax code?

Answer 1

4) In order to claim a dependency exemption or a tax credit for dependents, the dependent must satisfy the requirements for a qualifying child or relative, the primary requirement being that the taxpayer claiming the dependent provided more than ½ of the dependent's support during the tax year and the dependent's residence was the same as the taxpayer's for more than ½ of the year. A taxpayer may also claim certain deductible expenses, such as medical expenses, that are paid on behalf of a qualifying child or relative. A non-relative can also be claimed as a dependent if he lived with the taxpayer for the entire calendar year and the living arrangement does not violate local law.

A qualifying child must satisfy 5 requirements listed in IRC §152 (c):

1. The qualifying child must satisfy the relationship requirement, by being 1 of the following:
   • son or daughter, either as a natural child or stepchild, or a descendant thereof;
   • sibling, stepsibling, or a descendant thereof;
   • foster or adopted child.
2. The individual must, by the end of the calendar year, be younger than 19 or younger than 24 if a full-time student. There is no age limitation for a permanently disabled child.
3. Dependents must have the same principal residence as the taxpayer for more than ½ of the year. This residency requirement excludes temporary absences such as for illness, school, vacation, or military service where the child has every intention of returning. However, special rules apply to children of divorced or separated parents. A child who is either born or dies during the tax year is considered to have lived with the taxpayer for the entire year if the child lived in the taxpayer's home while still alive.
4. The claimed dependent must not have provided more than ½ of their own support during the year, even if they were able to. However, income from scholarships is not considered support.
5. Only 1 dependent can be claimed by 1 individual, so in those cases where more than 1 taxpayer can claim a dependent, the taxpayers must decide who will claim the exemption.

If a child fails to meet all the requirements of a qualifying child, the individual may still be claimed as a qualifying relative, if they meet the requirements.

The taxpayer claiming the qualified child is the only one that can claim the following for that child:

• head-of-household filing status
• earned income credit
• child tax credit
• dependency exemption
• dependent care credit
• tax-free child care assistance, which allows employer reimbursements of up to $5000 for the custodial parent's qualified childcare expenses from a flexible spending account arrangement

Qualifying Relative:

A qualifying relative includes all the relationships defined for a qualifying child, but also includes (IRC §152 (d)):

• half-brothers and half-sisters;
• parents, grandparents, or other direct ancestors;
• stepparents, aunts or uncles, nieces or nephews;
• sons- and daughters-in-law, father-in-law, mother-in-law, and brothers- or sisters-in-law;
• or any other relative who lived the entire year in the taxpayer's principal place of residence and is also a member of the taxpayer's household.

A qualifying relative satisfies the qualifying relative relationship test if the relationship satisfies the qualifying child relationship test or any of the relatives listed above except for the last item. These relatives do not need to reside with the taxpayer to be claimed as a qualifying relative. For instance, even if the parent lives elsewhere, a child providing for more than half of the parent's support can claim a dependency exemption for the parent. Note that any qualifying relationship that was established by marriage is not ended by divorce or death for that tax year.

However, nieces, nephews, aunts, and uncles, can only be claimed if they are blood relatives of the taxpayer claiming the dependency exemption. A spouse or a qualifying child either of the taxpayer or of any other taxpayer can never be claimed as a qualifying relative.