2005 Tax Law Changes - Uniform Definition of a Qualifying Child

From TaxAlmanac

Summary

Beginning in 2005, one definition of a “qualifying child” will apply for each of the following tax benefits.

• Dependency exemption.
• Head of household filing status.
• Earned income credit (EIC).
• Child tax credit.
• Credit for child and dependent care expenses.

Tests To Meet

In general, all four of the following tests must be met to claim someone as a qualifying child.

Relationship test. The child must be your child (including an adopted child, stepchild, or eligible foster child), brother, sister, stepbrother, stepsister, or a descendent of one of these relatives.

An adopted child includes a child lawfully placed with you for legal adoption even if the adoption is not final.

An eligible foster child is any child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Residency test. The child must live with you for more than half of the year. Temporary absences for special circumstances, such as for school, vacation, medical care, military service, or detention in a juvenile facility count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was the child's home for the entire time he or she was alive during the year. Also, exceptions apply, in certain cases, for children of divorced or separated parents and parents of kidnapped children. For more information, see Publication 501, Exemptions, Standard Deduction, and Filing Information.

Age test. The child must be under a certain age (depending on the tax benefit) to be your qualifying child.

Dependency exemption, head of household filing status, and EIC. For purposes of these tax benefits, a child must be under age 19 at the end of the year, or under age 24 at the end of 2005 if a student, or any age if permanently and totally disabled.

A student is any child who, during any 5 months of the year:

• Was enrolled as a full-time student at a school, or
• Took a full-time, on-farm training course given by a school or a state, county, or local government agency.

A school includes a technical, trade, or mechanical school. It does not include an on-the-job training course, correspondence school, or night school.

Child tax credit. For purposes of the child tax credit, a child must be under the age of 17.

Credit for child and dependent care expenses. For purposes of the credit for child and dependent care expenses, a child must be under the age of 13 or any age if permanently and totally disabled.

Support test. The child cannot have provided over half of his or her own support during the year. For the definition of support, see Support Test, in Publication 501.

Exception. For purposes of the EIC only, the support test does not apply.

Qualifying Child of More Than One Person

Sometimes a child meets the tests to be a qualifying child of more than one person. However, only one person can treat that child as a qualifying child. If you and someone else (other than your spouse if filing jointly) have the same qualifying child, you and the other person(s) can decide who will claim the child.

Dependency Exemption

To claim the dependency exemption for a qualifying child, all four tests listed earlier under Tests To Meet must be met. The child generally must also be a U.S. citizen, U.S. national, or a resident of the United States, Canada, or Mexico. An exception applies for certain adopted children. If married, the child cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.

A person who used to qualify as your dependent but who is not your “qualifying child” may still qualify as your dependent as a “qualifying relative.” To claim the dependency exemption for a qualifying relative, the person cannot be the qualifying child of any other person and all five dependency tests discussed under Dependency Tests in Publication 501 must be met.

If you are a dependent of another person, you cannot claim any dependents on your return.

Head of Household Filing Status

In general, you can use head of household filing status only if, as of the end of the year, you were unmarried or “considered unmarried” and you paid over half the cost of keeping up a home:

1. That was the main home for the entire year of your parent whom you can claim as a dependent (your parent did not have to live with you), or
2. In which you lived for more than half of the year with either of the following:

1. Your qualifying child (defined earlier, but without regard to the exception for children of divorced or separated parents). But, if your qualifying child is married at the end of the year, see Married child, later.
2. Any other person whom you can claim as a dependent.

But you cannot use head of household filing status for a person who is your dependent only because:

• He or she lived with you for the entire year, or
• You are entitled to claim him or her as a dependent under a multiple support agreement.

Married child. If your qualifying child is married at the end of the year, both of the following must apply for the child to be your qualifying child for purposes of head of household filing status.

• The child cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.

• The child must be a U.S. citizen, U.S. national, or a resident of the United States, Canada, or Mexico. An exception applies for certain adopted children.

Earned Income Credit (EIC)

For purposes of the EIC, a qualifying child must meet the Relationship test, Residency test (without regard to the exception for children of divorced or separated parents), and Age test, discussed earlier. A qualifying child does not have to meet the Support test for purposes of the EIC. But, if your qualifying child is married at the end of the year, see Married child, below. For additional rules that you must meet to claim the EIC, see Publication 596, Earned Income Credit.

Married child. A child who is married at the end of the year is a qualifying child for purposes of the EIC only if you can claim him or her as your dependent (see Dependency Exemption, earlier) or this child's other parent claims him or her as a dependent under the rules for children of divorced or separated parents in Publication 501.

Child Tax Credit

You may be able to take the child tax credit if you have a qualifying child who meets all four of the tests listed earlier under Tests To Meet. For additional rules that you must meet, see Publication 972, Child Tax Credit.

Credit for Child and Dependent Care Expenses

Generally, a qualifying person for purposes of the credit for child and dependent care expenses is:

• Your qualifying child (defined earlier, but without regard to the exception for parents of kidnapped children), or
• Your dependent or spouse who is physically or mentally incapable of caring for himself or herself and who lived with you for more than half of the year.

For purposes of the credit for child and dependent care expenses, a qualifying child and dependent are determined without regard to the exception for children of divorced or separated parents and the child is treated as a qualifying person only for the custodial parent.

For additional rules that you must meet, see Publication 503, Child and Dependent Care Expenses. However, for 2005, you no longer need to meet the Keeping Up a Home Test discussed in Publication 503.

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