DEDUCTION FOR DEPENDENTS

WHO CAN I DEDUCT AS A DEPENDENT?
A dependent must qualify either as a “Qualifying Child” or as a “Qualifying Relative”
DOES MY CHILD HAVE TO QUALIFY UNDER BOTH OF THESE CATEGORIES?
If your child does not qualify under the “qualifying child” rules he may qualify as a Qualifying Relative. If he qualifies as a qualifying child, he does not also have to qualify under the Qualifying Relative rules.

Link to TAX MAN: http://wwwtaxman.blogspot.com/

INELEGIBLE:
Inelegible if claimed by someone else: You can't calim someone who can be claimed as a dependent on someone else’s return
Ineligible if they are a Joint Filer: You cannot claim someone who files jointly with a spouse unless the joint return was only to claim a refund and they would not have owed tax if the filed separately
Inelegible if not aCitizen or Resident: A dependent must be a US citizen, US national or resident of US, Canada or Mexico

ELEGIBLE
People may qualify if they meet either the “Qualifying Child” or Qualifying Relative” tests.

Qualifying Child or Relative:
Son, daughter, stepchild, foster child or descendent of any of these
Brother, sister, son or daughter of any of these (niece or nephew)
Father, mother, grandparent, aunt or uncle
Stepbrother or sister, stepfather or mother
Son or daughter-in-law, father or mother-in-law, brother or sister-in-law.
Any other person other than your spouse who lived with you ALL year as a member of your household (if the relationship does not violate local law).

QUALIFYING CHILD (must meet all of these tests)
Relationship test:
Must be son, daughter, brother, sister, stepchild or foster child
Or they can be your grandchild, niece or nephew.
Member of Household test:
Must live with you over half of 2006 (a few exceptions apply)
Age test:
Under 19 at end of 2006
Under 24 if full time student five months in 2006
Any age if permanently and totally disabled.
Support test:
The child cannot provide over half of his own support.
NOTE: If your child does not qualify under these tests, he may qualify as a “Qualifying Relative”

QUALIFYING RELATIVE:
Qualifying Relative Tests
You provide over half of the support for the qualifying relative
They are not a qualifying child of another person
They earn less than $3300
They meet the Relationship Test:
===They may meet the relationship test as a qualifying child, but may not meet other qualifying child tests.
You can also claim parents, grandparents, stepbrothers, stepsisters and stepparents
Also you can claim in-laws: son and daughter in-law, father and mother in-laws
A qualifying “relative” can also be any other person, not necessarily a relative, who lived with you all year as a member of your household if the relationship did not violate local law.
OTHER RULES AND EXCEPTIONS: There are a few additional rules, but generally the above cover it all.
One item that sometimes needs to be explored is “what expenses count as support”?
If you need IRS forms or publications:
http://www.irs.gov/formspubs/index.html
EXAMPLES:
Allowable: My 18-year-old son works and makes over $3300 and I provide over half of his support.
Not Allowed: My 20-year-old son works and makes over $ 3300 and is not a full time student.
Allowable: My 20-year-old son makes under $3000 and is not a full time student.
Not Allowable: My father works and makes over $3300
Not Allowable: My uncle works and provides 60% of his own support.
Not allowable: My friend, Bubba, lives with me 10 months out of the year and I provide all of his support. (must live with you all year to qualify).

This information is not intended to be advice to the recipient.In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.