Personal and Dependency Exemptions Flashcards
Can a dependent claim own personal deduction when another TP claimed him as a dependent?
No.
What are 2 qualifying test for dependent?
Qualifying child or qualifying relative.
Can a personal exemption be claimed if TP or spouse dies during the tax year? Where?
Yes.
On TP’s final tax return.
When birth or death occurs during the tax year, what’s the portion of exemption can TP claim?
A full exemption is allowed.
What are 6 tests for a qualifying child?
Relationship test, residence test, age test, joint return test, citizenship/residency test, not self-supporting test.
What is relationship test? Is spouse a dependent? Exception?
Natural child, stepchild, adopted child, foster child, sibling, step-sibling, or a descendant of any of these (child, grandchild) - this include brothers, sisters, nieces, and nephews.
No.
If a married couple files separately and a spouse has no gross income and was not claimed as another’s dependent, the spouse can be dependent.
What is residence test?
The dependent must have the same principal place of abode as the TP for more than one half of the tax year.
What is age test?
The dependent must be less than 19 at the end of the tax year, or less than 24 if a full-time students for at least 5 months of the tax year. No age limitation if the individual is permanently and totally disabled.
What is joint return test?
If the individual is married and files a joint return with the spouse, he can’t be claimed as a dependent, unless there is no tax liability on the return (he is filing to get refund).
What is citizenship/residency test?
The individual must be a US citizen or resident, or a resident of Canada or Mexico.
What is not self-supporting test?
To be claimed as a dependent, the individual must not have provided more than 50% of her own support.
What is other requirement re: age of TP and the child? Re: parents decline?
The child must be younger than the TP.
If the parents qualify to claim him as a dependent, but declines, then no one else can claim him unless the new TP’s AGI is higher than the parents’.
What does term “qualifying relative” include?
All common relatives except for cousins.
Also any person who lives in TP’s home for the entire tax year.
What are 5 tests for qualifying relative?
Relationship test, support test, joint return test, citizenship/residency test, and gross income test.
What is support test?
The TP must provide more than 50% of the total support.
What is gross income test? What’s the definition of gross income?
The dependent’s gross income must be less than the exemption amount for the year.
Gross income: Only income that is taxable (i.e. social security benefit - non-taxable - don’t include in gross income test).
What are 2 exceptions to gross income test?
If a child/step child (adopted and foster);
- that is less than 19 at the end of the tax year.
- that is less than 24 at the end of the tax year and is a full-time student for at least 5 months during the tax year.
What does “support” include? What it doesn’t include?
Yes: Food, clothing, value of lodging, medical, education, recreation, and certain capital expenses.
No: Life ins premiums, funeral expenses, nontaxable scholarships, unused sources of funds of dependent.
If no one person provides more than 50% of an individual’s support, but a group of individuals does, what is the tax option?
The group can file a multiple support agreement designating which person will claim the individual as a dependent.
Multiple support agreement: what are 2 other criteria to use this option re: the person designated?
The person designated must;
- provide more than 10% of the support for the individual.
- meet the other dependency tests.
Divorced parents: who gets the exemption?
The parent with custody (over half the year) in the absence of any written agreement.
Divorced parents: can the custodial parent waive the exemption? How?
Yes by signing Form 8332 and non-custodial parent must attach this form to the return.
Tie-breaking rules: who has the highest priority? If the TP declines?
Parents.
A TP who has higher AGI than any other person who qualifies.
Tie-breaking rule: If both individuals are parents and they do not file a joint return? If even that is tie?
The parent with who the child resides longest.
The parent who has highest AGI.
Tie-breaking rule: if none of TPs are parents?
TP who has the highest AGI.
Phase-out: what is it? If the excess AGI is 2,501?
2% of total exemptions are lost for each $2,500 increment (or portion) above the threshold AGI.
i.e. 4% reduction.
Phase-out: can TP still claim exemptions even if not eligible to receive the exemption?
Yes.
