Ever been in a situation where you’ve had somebody staying with you for an extended period of time?

Maybe it was the relative that was going to stay with you for a “brief period of time” until they “got back on their feet”.

Heard that one before?

Or maybe you’ve had to have a parent move in with you where you’ve had to take care of them.

If you find yourself in a similar situation, you might be wondering what tax deductions are in store for you.

To be able to claim a dependent on your return (and don’t forget to file by the tax deadline), there are 5 tests that you have to pass in the eyes of the IRS.   Here they are:

1.  Support Test.

The tax payer must provide more than half the support of the claimed dependent, except for special rules with respect to multiple-support agreement and children of divorced or separated parents.  Support includes:  food, lodging, clothing, education, medical and dental care, recreation, transportation and other necessities.

2.  Gross Income Test.

5 tests to claim a dependent on your tax returnThe person claimed as a dependent must have gross income of less than the annual personal dependency exception amount.

For example, this amount is $3,800 in the 2012 tax year ($3,900 in 2013).  However, the ceiling does not apply if the dependent is a child of the tax payer is under age 19 at the end of the calendar year or a full-time student at under age 24 at the end of the calendar year.

3.  Member of Household Relationship Test.

The person claimed as a dependent must be related to the tax payer in a specific way, i.e. the natural or adopted child or parent, or must be a member of the tax payers household for the entire tax year.

A parent or child does not have to live in the same household as long as other criteria are met.

For example, a parent living in the home or in an assisted living facility could still meet the test.  A disabled child in a residential treatment center can meet the support test as well.

4.  Joint Return Test.

The person claimed as a dependent must not generally file a joint income tax return with another unless the only reason to file the return was to obtain a full refund of tax withheld.

5.  Citizen/Residency Test.

The claimed dependent must be a US citizen, national or resident of the United States or a resident of Canada or Mexico at some time during the calendar year in which the tax year of the tax payer begins.  In addition to these five tests, an individual must be claimed as a dependent on another person’s return, like a parent, cannot claim a personal exemption for himself.

Finally, the dependent has a reduced standard deduction.  For 2012, this reduced amount is the greater of $950 or the dependent’s earned income plus $300 as long as that total is less than the dependent’s standard deduction.  This deduction amount, however, cannot exceed the basic standard deductions for the dependent taxpayer’s filing status, which in 2012 is $6,100.

Dependency exemption rules are complicated, so review IRS Publication 501 and talk to a tax advisor before staking your claim. And don’t forget that your dependent may need to file a tax return as well.

5 tests to claim a dependent on your tax return

Resource: IRS Pub 503


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