You are allowed one exemption for each person you can claim as a dependent. A dependent can be your Qualifying Child or Qualifying Relative. But you can claim exemption for a qualifying child or qualifying relative only if these three tests are met.
Dependent taxpayer test. You can’t claim a dependent if you are a dependent or can be claimed a dependent by another person. On a joint return, even if your spouse can be claimed as a dependent, you can’t claim a dependent.
Joint return test. You can’t claim a married person as dependent if he or she files a joint return except that the joint return is only a claim for refund and no tax liability would exist for either spouse on separate returns.
Citizen or resident test. A dependent must be a U.S. citizen, U.S. resident alien, U.S. national or a resident of Canada or Mexico, for some part of the year.
Qualifying Child
You can claim a child as dependent only if the following requirements are met
1. Relationship. The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. Age. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student minimum for during any 5 months in the tax year, or (c) any age if permanently and totally disabled.
3. Residency Test. The child must have lived with you for more than half of the year except for temporary absences.
4. Support Test. The child must not have provided more than half of his or her own support for the year. A scholarship received by a child who is full time student is not considered.
5. Special Test for Qualifying Child of More than One Person. If the child meets the rules to be a qualifying child of more than one person,
(a) you all must agree on who claims the child, or
(b) you must be the person entitled to claim the child as a qualifying child using tie-breaker rule.
Qualifying Relative
You can claim a relative as dependent only if the following requirements are met:
1. Not a Qualifying Child Test. (a) A child cannot be your qualifying relative if the child is your qualifying child or qualifying child of any other taxpayer. (b) You cannot claim a child as dependent who lives in a foreign country other than Canada or Mexico, unless the child is a U.S. citizen, resident or U.S. national for some part of the year.
2. Member of Household/Relationship Test. The person either (a) must be related to you (read who is related to you?), or (b) must live with you all year as a member of your household (and your relationship must not violate local law).
3. Gross Income Test. The person's gross income for the year must be less than $3,400 (for 2007) or $3,500 (for 2008).
4. Support Test. You must provide more than half of the person's total support for the year.
Who is a related person? A related person can be your child, stepchild, eligible foster child, your grandchild, your brother, sister, half brother, half sister, stepbrother, or stepsister, your father, mother, grandparent, or other direct ancestor, but not foster parent, your stepfather or stepmother, A son or daughter of your brother or sister, A brother or sister of your father or mother, Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.)
Which relationship violates the local law? Your relationship must not be illegal under local law against cohabitation, even if it's not enforced. Today, just seven states (North Carolina, Mississippi, Virginia, West Virginia, Florida, Idaho and Michigan) still criminalize cohabitation by opposite-sex couples, although anti-cohabitation laws are generally not enforced).
How many qualifying children you can claim? There is no limit on the number of qualifying children you can claim on your tax return. For every qualifying child you will get an extra exemption deduction ($3,500 for 2008). Each each qualifying child for Child Tax Credit you will get a tax credit of $1,000. However, the earned income credit is same if you have two qualifying children or more than two qualifying children.
Child born alive. You may be able to claim an exemption for a child who was born alive during the year even if the child lived only for a moment. There must be proof of a live birth shown by an official document such as a birth certificate.
More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Any Question?
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