To follow up on my previous article as to what a qualifying child was, here are the differences between a qualifying child and a qualifying relative according to the IRS:
Definition of a “qualifying child” and “qualifying relative”
Section 152(c)(1) defines a “qualifying child” of a taxpayer as an individual who: (A) bears a certain relationship to the taxpayer, (B) has the same principal place of abode as the taxpayer for more than one-half of the taxable year, (C) meets certain age requirements, and (D) has not provided over one-half of his or her own support for the calendar year.
Section 152(d)(1) provides, in part, that to be a “qualifying relative” of a taxpayer, an individual must: (A) bear a certain relationship to the taxpayer, (B) have gross income for the calendar year that is less than the exemption amount (as defined in section 151(d)), and (C) derive over one-half of his or her support for the calendar year from the taxpayer. In addition, section 152(d)(1)(D) requires that the individual not be a qualifying child of the taxpayer or of “any other taxpayer” for the taxable year. Section 152(d)(2)(H) provides that a qualifying relative may include an individual who has the same principal place of abode as the taxpayer and who is a member of the taxpayer’s household.
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What does all that mean to us mere mortals? In order to qualify somebody as a qualifying relative you need to pass the following tests:
To claim a dependency exemption for a qualifying relative, the person must meet
the following tests:
• Dependent Taxpayer Test
• Joint Return Test
• Citizenship Test
• Not a Qualifying Child Test
• Member of Household or Relationship Test
• Gross Income Test
• Support Test
How does all of this breakdown? Check this out:
Qualifying Relative
All of the following tests must be met to claim a dependency exemption under
the rules for a qualifying relative.
Dependent Taxpayer Test — Qualifying Relative
If you could be claimed as a dependent by another person, you cannot claim
anyone else as a dependent. Even if you have a qualifying child or qualifying
relative, you cannot claim that person as a dependent.
Member of Household or Relationship Tests — Qualifying Relative
• Member of household-The person must live with the taxpayer for the
entire year as a member of the taxpayer’s household.
OR
• Relationship-The person must be related to the taxpayer in one of the
allowable ways. Certain relatives do not have to be members of the
taxpayer’s household for the entire year.
Taxpayers will meet this test for persons
• who are relatives, even if the persons are not members of the
taxpayer’s household for the entire year.
• who are not relatives if the persons are members of the taxpayer’s
household for the entire year.
Citizenship Test:
The individual is either a citizen or resident of the United States, or a resident of a country contiguous to the United States (exceptions exist for certain legal adoptions).
Member of Household Test — Qualifying Relative
Taxpayers will meet this test for all persons who live with the taxpayer
as a member of the household if the persons pass the member of
household test.
• The dependent does not have to be related to the taxpayer.
• The dependent must live with the taxpayer all year except for
temporary absences. (Temporary absences include attending school,
taking vacations, and staying in the hospital.)
• The relationship between the taxpayer and the dependent must not
violate local laws
Relationship Test — Qualifying Relative
Taxpayers will meet this test for the following relatives if the relatives meet
the requirements of the relationship test:
• child
• parent
• brother/sister
• stepparent
• stepchild
• stepbrother/stepsister
• half brother/half sister
• grandparent
• grandchild
• son-in-law/daughter-in-law
• mother-in-law/father-in-law
• brother-in-law/sister-in-law
If related by blood, relatives also include
• uncle/aunt and
• niece/nephew.
• Cousins do not meet the relationship test.
• Relatives do not have to be members of the taxpayer’s household.
• Relationships established by marriage are not ended by death or
divorce. For example, a daughter-in-law is a relative to her in-law
parents even after the death of their son (her husband).
There are special rules for children born during the year, adopted
children, and foster children.
Remember: To claim a dependency exemption, all tests must be met, including
either the relationship test or the member of household test.
Gross Income Test — Qualifying Relative
Taxpayers will meet this test for persons whose gross incomes are less
than the exemption amount.
• In 2007, the exemption amount was $3,400.
Gross Income
• is all taxable income in the form of money, property, and services;
• includes unemployment compensation and certain scholarships; and
• does not include welfare benefits and nontaxable Social Security
benefits.
Remember: To claim a dependency exemption, all five tests must be
met.
Support Test — Qualifying Relative
Taxpayers will meet this test if the taxpayer provided more than half of a
person’s total support for the entire year.
Total support items include
• food, clothing, shelter, education, medical and dental care, recreation, and
transportation; and
• welfare, food stamps, and housing provided by the state.
Compare the dollar value of the support provided by the taxpayer with the
total support the person received from all sources.
There are special rules for dependents who receive support
from multiple sources and for children of divorced or separated
parents.
Important Point:The gross income test considers the dependent’s taxable
income. The support test considers all income, taxable and nontaxable.
Remember: To claim a dependency exemption, all five tests must be met.
Hope that helps. For more information, check with the IRS, your state and local tax authorities and your tax pro!
Kim Greenblatt
You are learning what a qualifying relative is with Kim Greenblatt at his blog, profitable.