Husband and wife have 4 kids. The wife passes away. Five years later, the husband unexpectedly dies.
Two of the kids are adults in their 20s, but the other 2 kids are teenagers under the age of 18 and still in high school. The oldest 20-something gets custody of the teens.
In the year the father died, who claims the kids: the father on his final tax return, or the eldest child who now has custody?
First, let’s look at what tax law says.
Section 152 of the Internal Revenue Code defines the term “dependents.” A dependent falls into one of two categories:
- A qualifying child, or
- A qualifying relative
A qualifying child is:
- A taxpayer’s child, grandchild, brother, sister, step-brother or step-sister
- Lives with the taxpayer more than 1/2 of the year
- Is under age 19 at the end of the tax year, or under age 24 at the end of the tax year if the child is a student
- A child who does not provide more than 1/2 OF THEIR OWN support
- The child is not married, or if they are married, does not file a joint tax return with their spouse (except in certain cases involving the earned income credit).
A qualifying relative is:
- Someone whose gross income is below the personal exemption amount for the year (for example, below $3,950 in 2014)
- The taxpayer must provide more than 1/2 of the person’s support
- The relative cannot qualify someone else’s qualifying child
Additionally, someone who’s not a blood relative must live with the taxpayer all year in order for the taxpayer to claim that person as a dependent.
In Part 2, I’ll analyze how this applies to the scenario posed at the beginning of this post.
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“This blog post, along with comments that may follow, should not be considered tax advice. Before you make final tax or financial decisions, please secure a professional tax advisor to give you advice about your unique situation. To secure Jason as your accountant, please click on the ‘Services’ link at the top of the page.”