In other cases, says LeValley-Cocovinis, "We have divorced parents who share custody and maybe the child lives with one person most of the time, but that parent didn't provide the majority of the child's financial support. Or sometimes the custody is split six months each so that there is not a clear-cut time of residency."
LeValley-Cocovinis says that in these cases "the IRS had to say, 'Sorry. No tax break.'"
To address these situations, tax-law writers opted to eliminate the support test. With that requirement gone, say both Burlison and LeValley-Cocovinis, taxpayers have more choice when considering child dependency issues and families are able to decide which adult filer would or should get the tax break.
"If a single mom is getting financial help from a parent or lives with a boyfriend who is providing support, it's no longer an issue that she didn't provide the majority of the child's support," says LeValley-Cocovinis. "The child lived with her and residency now trumps support."
Child dependent tests
In order to claim a child as your dependent so that you can use the $3,500 exemption, as well as gain other potential child-related tax breaks, the youngster must now meet four tests.
Child dependent tests
- Relationship test: The child must be your child, either by birth, adoption or by being placed in your home as a foster child. Even if the adoption isn't yet final, if the child is living with you and the process is under way, it counts. A dependent child can also be your brother, sister, stepbrother, stepsister or a descendent of one of these relatives.
- Residency test: The child must live with you for more than half of the year. If the youth is away temporarily for special circumstances, such as for school, vacation, medical treatment, military service or detention in a juvenile facility, these particular absences still 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.
- Age test: A child must be under a certain age, depending on the particular tax benefit. For the dependency exemption, the child must be younger than 19 at the end of the year. However, a youth who was a student at the end of the year can be claimed as long as he or she is younger than age 24. There is no age limit where the individual is permanently and totally disabled.
- Support test: This refers to the youngster's contributions, not those of adults in the family. To qualify as a dependent, the child cannot provide more than half of his or her own support during the year.
The support issue usually is not a problem, says Burlison. However, if the child is a successful model, for example, he or she could bring in substantial income and therefore might not be able to be claimed as a dependent under this test. Even then, as long as the parents provide more than the youngster is bringing in, says Burlison, then the child would still qualify.
Even after the child meets the four qualifying tests, there are two other considerations before he or she can be claimed as a dependent for exemption purposes.