MODULE 5: dependants

Tax Laws for Classifying Dependents

• Overview: Two main classifications for dependents: Qualifying Child (QC) and Qualifying Relative (QR).

Qualifying Child Rules (QC)

Tests Required to Qualify as a Child

• Relationship Test:

  • Must be the taxpayer’s child, sibling, or descendant (e.g., grandchildren).

  • Includes immediate family and descendants.

• Residence Test:

  • The individual must live with the taxpayer for more than half of the year.

  • Temporary absences (e.g., college, hospitalization) are excluded from this calculation.

• Age Test:

  • Must be under 19 years old, or under 24 and a full-time student.

• Support Test:

  • Must not provide more than half of their own financial support.

Application of Qualifying Child Rules

• An individual must meet all four tests to qualify as a dependent.

• If they fail even one test, they cannot be considered a qualifying child.

Qualifying Relative Rules (QR)

Tests Required to Qualify as a Relative

• Relationship Test:

  • More inclusive: includes parents, grandparents, siblings, aunts, uncles, in-laws, and members of the taxpayer's household.

  • Members of household require that they live with the taxpayer for the entire year.

• Gross Income Test:

  • Must have a gross income of less than $5,050.

  • Gross income excludes certain types of income (e.g., tax-exempt interest).

• Support Test:

  • Taxpayer must provide more than 50% of the individual's support.

• Cannot be a Qualifying Child of Someone Else:

  • If they are someone else’s qualifying child, they cannot be claimed as a relative.

Application of Qualifying Relative Rules

• All three tests and one additional criteria (not being a qualifying child) must be met for an individual to be considered a qualifying relative.

Examples of Dependency Classification

Jason's Potential Dependents

1. Maria (Mother):

   • QC:

     • Fails all tests (does not live with taxpayer, age not applicable).

   • QR:

     • Relationship: Passes.

     • Gross Income: Passes (below $5,050).

     • Support: Passes (Jason provides 80%).

   • Conclusion: Can claim as dependent under QR.

2. Jeff (Son):

   • QC:

     • Relationship: Passes.

     • Residence: Passes (lived together all year).

     • Age: Fails (21, not a student).

     • Support: Meets test (providing only 15% of his own support).

   • QR:

     • Relationship: Passes.

     • Gross Income: Passes (earned $4,000).

     • Support: Fails (Jason provides only 25%).

   • Conclusion: Not a dependent.

3. Rod (Father):

   • QC: Fails all tests (not child or sibling).

   • QR:

     • Relationship: Passes.

     • Gross Income: Fails (over $5,050).

   • Conclusion: Not a dependent.

4. Mark (Brother):

   • QC:

     • Relationship: Passes.

     • Residence: Passes.

     • Age: Passes (17 years old).

     • Support: Passes (providing only 25% of own support).

   • Conclusion: Can claim as dependent under QC.

5. Leila (Girlfriend):

   • QC: Fails (not a qualifying child).

   • QR:

     • Relationship: Passes (member of household).

     • Gross Income: Passes (no income).

     • Support: Passes (Jason provides all support).

   • Conclusion: Can claim as dependent under QR.

Summary of Jason's Dependents

• Qualifying Child: Mark.

• Qualifying Relatives: Maria and Leila.

• Not Dependents: Jeff and Rod.