The youngster 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.
And 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.
Tie-breaker guidelines
Sometimes a child can be the qualifying child of more than one person. However, since the IRS only allows one taxpayer to claim the same youngster, all eligible taxpayers must decide who will claim the child and any ensuing tax benefits.If you can't agree and both of you list the youth on separate returns, expect the IRS to disallow one or more of the claims using tie-breaker rules.
Tie-breaker rules
- First, the agency looks at whether only one person is the child's parent. This would be the case, for example, if one credit claimant is a stepparent. The parent would get the credit.
- If both taxpayers are the child's parents, then the parent with whom the child lived the longest during the tax year would be allowed the credit. If the child lived with both separated parents for an identical amount of time, the credit would go to the parent with the highest adjusted gross income.
- Finally, if neither person is the child's parent, the IRS would then allow the credit to the filer with the highest eligible AGI.
If several children are involved in a family situation where two taxpayers may claim them, the adults can decide to share the children for tax purposes. For example, you and your three children live with your mother. You can claim one child as a dependent and your mother can claim the other two. Again, if such a sharing agreement cannot be reached, the tiebreaker rules would come into play.
What if a person used to qualify as your dependent, but under the new definition is not your qualifying child? That person might qualify as your dependent as a "qualifying relative." To claim this dependency exemption, the child cannot be the qualifying child of any other person and must meet the all the dependency tests detailed in IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
Final exemption factors
A spouse is never considered a dependent. However, you can claim an exemption for your husband or wife as long as you file a joint return.You also are allowed an exemption deduction for yourself. But if you file a return while being claimed as a dependent on someone else's 1040, the IRS warns that you won't be able to claim a personal exemption on your own return.
The exemption amount also is reduced if you make a lot of money. On 2008 returns, exemptions are whittled down if you make more than $119,975 and are a married person filing a separate return; earn more than $159,950 as a single filer; make more than $199,950 as a head of household; or are married filing jointly or a qualified widow or widower with income of more than $239,950.
And remember to include the Social Security number of each person claimed as an exemption or dependent on your tax return. Without this number, the agency won't process your filing and could even disallow your claims.