Personal/Dependency Exemptions Flashcards
Personal Exemption
Personal Exemption = need to protect minimum amount of income from tax to support a taxpayer
2 Types of Personal Exemptions:
- Taxpayer (if Single Filing)
- Taxpayer & Taxpayer Spouse (if Joint Filing)
Dis-allowance of Personal Exemption = denied personal exemption if he/she qualifies as a dependent of another taxpayer
Dependent Exemption
Dependent = A person who derives his/her primary support from another
2 Types of Dependents:
- Qualifying Child
- Qualifying Relative
6 Qualifying Child Tests
6 Tests for Qualifying Child
- Relationship Test
- Residence Test
- Age Requirement
- (No) Joint Return Test
- Citizenship/Residency Test
- (Not) Self-Supporting
5 Qualifying Relative Tests
5 Qualifying Relative Tests
- Support Test
- Gross Income Test
- Relationship/Member of Household Test
- Joint Return Test
- Citizenship/Residency Test
Relationship Test (C)
Relationship Test for Qualifying Child
- Child (step, adpoted, foster)
- Sibling (step)
- Decendent of either
Residence Test
Residence Test for Qualifying Child does not apply to Qualifying Relative
- Same principal place of abode as the taxpayer for more than 6 months
(Easy for anyone living with the child > 6 months would meet this)
Age Test
Age Test for Qualifying Child does not apply to Qualifying Relative
- < 19 years old at end of taxable year
- < 24 years old AND full-time student at end of taxable year
- Permanently disabled at any time of the year → no Age Test
- Child younger than taxpayer
Self-Support Test
Not Self-Supporting Test for Qualifying Child does not apply to Qualifying Relative
- The child cannot provide more than 1/2 of their own support
Total Support amount actually spent or expended on behalf of the person, income and funds available are ignored unless spent
(Scholarships are not counted)
Support Test
Support Test for Qualifying Relative does not apply to Qualifying Child
- Taxpayer must provide more than 50% of dependent’s total support
Total Support amount actually spent or expended on behalf of the person, income and funds available are ignored unless spent
(Social Security benefits & State Welfare Payments → included to extent spent)
(Non-Cash support is valued at fair market value)
Gross Income Test
Gross Income Test for Qualifying Relative does not apply to Qualifying Child
- Dependent’s Gross Income must be < 3950 (exemption amount)
(Gross Income is not always synonymous with includible gross receipts)
Relationship Test (R)
Relationship Test for Qualifying Relative does not apply to Qualifying Child
- Child or descendant of child
- Sibling
- Parent or ancestor of parent
- Step father/Stepmother
- Niece/Nephew\Aunt or Uncle
- All the in-laws
- Person who lives in taxpayer’s home/member of household for >1 year
Joint Return Test
Joint Return Test For BOTH dependent must not file a joint return
(This test does not apply to qualifying child in order to be considered a widow)
Citizenship Test
Citizenship Test for BOTH
- US Citizen
OR
- Resident of US, Canada or Mexico
Multiple Support Agreement
Multiple Support Agreement can claim dependeyc for qualifying relative even if you don’t meet support test alone
- No 1 person meets support test alone (>50%)
- A group together meets the support test (>50% together)
- Dependency Exemption goes to ssomeone who provides >10%
Children of Divorced Parents
Children of Divorced Parents if together the parents provide >50% of child’s support, dependency exemption claimed by custodial parent
Custodial Parent parent with whom child resides for the greater part of the year
-Custodial parent can relinquish right to dependency bvy signing a form and granting it to the non-custodial parent
Non-Custodial Parent can be considered head of household because they have an unmarried qualifying child
