Taxes: Personal & Dependency Exemptions

Question 1

Taxes:
Personal & Dependency Exemptions
Personal Exemptions

Answer 1

General

• can only be claimed once
• can be claimed even if died during year
• can be claimed if no self-return on spouses return

Question 2

Taxes:
Personal & Dependency Exemptions
Dependency Exemptions

Answer 2

Dependency Exemptions
- must meet all tests to qualify
Qualifying Child
- Relationship Test: natural child, stepchild, adopted child, sibling, step-sibling, or descendant of these
- Residence Test: same principal place of residence for more than half the year
- Age Test: under 19 or under 24 if full time student 5 months of year, child must be younger than taxpayer unless disabled
- Joint-Return Test: dependent cannot file married-jointly
- Citizenship: must be a citizen/resident of US, Canada, or Mexico
- Not Self-Supporting: provided less than 50% own support

Question 3

Taxes:
Personal & Dependency Exemptions
Dependency Exemptions
Tie-Breaker Rules

Answer 3

Tie-Breaker Rules

• more than 1 individual qualifies to claim:
  
  • parent must claim unless another with higher AGI
  • parent with whom child resided longest
  • parent with highest AGI
  • individual with highest AGI

Question 4

Taxes:
Personal & Dependency Exemptions
Dependency Exemptions
Qualifying Relative

Answer 4

Qualifying Relative

• Relationship Test: all common relatives except for cousins, but including step parents, siblings, and inlaws
• Support Test: provide more than 50% support
• Gross Income Test: less than exemption amount $4k
  
  • under 19 or
  • under 24 and full time student
• Joint-Return Test: dependent cannot file married-jointly
• Citizenship: must be a citizen/resident of US, Canada, or Mexico

Question 5

Taxes:
Personal & Dependency Exemptions
Dependency Exemptions
Multiple Support Agreements

Answer 5

Multiple Support Agreements

• group of tax payers who support more than 50%
• each is eligible for exemption
• provides over 10% but less than 50%
• written agreement allocates a dependency exemption to one individual. All must sign

Question 6

Taxes:
Personal & Dependency Exemptions
Dependency Exemptions
Divorced Parents

Answer 6

Divorced Parents

• divorced or legally separated last 6 months of year
• parent with custody (over half) gets deduction

Question 7

Taxes:
Personal & Dependency Exemptions
Dependency Exemptions
Phaseouts

Answer 7

Phaseouts
- 2% lost for each $2,500 over
= (AGI over/2,500) = step rounded up
- done after 20 steps