CLAIMING DEPENDENTS

Who can I claim as a dependent on my tax return?
Taxpayers can apply the same definition of a dependent when determining their eligibility for the dependency exemption, head of household filing status, earned income credit, child tax credit, and child and dependent care tax credit.

To claim someone as a dependent, he/she must meet the following four criteria:

1. The Relationship Test
The dependent must be your child or a qualified relative. Qualified relatives include adopted children, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendent of one of these relatives.

2. The Residency Test
To qualify as your dependent, the child must live with you for more than half of the year. Time spent at school or vacation still counts as time lived at home, as does time away from home for medical care or military service. In addition, any time spent at a juvenile detention facility also counts as time lived at home.

3. The Age Test
This varies by tax benefit.

Dependency exemption, earned income credit and head of household filing status
To qualify for these tax benefits, the dependent child must be under age 19 by Dec. 31, 2006; under age 24 by Dec. 31, 2006, if the dependent is a student; or any age if he/she is permanently and totally disabled.

Child tax credit.
To qualify for the child tax credit, the dependent must be under 17.

Credit for child and dependent care expenses.
Children under 13 and permanent and totally disabled children of any age qualify for this credit.

4. The Support Test
To qualify as a dependent, a child cannot have provided more than 50 percent of his or her own support during the year. Support includes the cost of shelter, food, clothing, education, health care, transportation, and similar necessities.

Exception
If determining eligibility for the earned income credit, the support test does not apply.

I am divorced. Can I claim my child as a dependent?
In the case of divorced parents, the general rule is that the custodial parent claims the dependency exemption even if the non-custodial parent paid most of the child support. However, the custodial parent may agree to waive the exemption by signing Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents. The non-custodial parent attaches this form to his or her return and claims the exemption.

My sister and I help take care of my 80-year-old mother. Who can count her as a dependent?
If two or more persons together provide more than 50 percent of an individual’s support, but no one member of the group provides more than half, the individuals may enter into a multiple support agreement. Under this agreement, the dependency exemption may be claimed by any person providing more than 10 percent of the individual’s support. If you are that person, you must have each person who contributes over 10 percent sign IRS Form 2120, Multiple Support Declaration, which you submit with your tax return. For example, if you and your sister determine that you can claim your mother as a dependent this year, your sister would sign Form 2120 and waive her right to claim your mother as a dependent.

How much is a dependency exemption worth?
In general, for 2006, each taxpayer may claim a personal exemption of $3,300. If you are married and file a joint return, you and your spouse each claim a personal exemption. You can claim an exemption for your spouse, even if he or she died during the tax year, provided that you did not remarry. In addition, a taxpayer is entitled to an additional $3,300 dependency exemption for each qualified dependent. A child qualifies for an exemption, even if he or she is born on the last day of the year.

My husband and I have a combined income of $220,000. Do we still qualify for dependency-related deductions?
If you are a high-income taxpayer, your deductions for personal and dependency exemptions may be gradually phased out. For 2006, the phase out begins when a taxpayer’s AGI reaches $225,750 for joint filers, $150,500 for single filers, and $188,150 for heads of household.

To claim an exemption for a dependent, you must use Form 1040 or Form 1040A and include a Social Security number for each dependent.

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