Uniform Definition of a Child
The IRS has a uniform definition of a child that is used for filing status determination, the Child Tax Credit, Additional Child Tax Credit, Earned Income Tax Credit, and the credit for Child and Dependent Care Expenses.
The uniform definition of a child is:
Child - A natural child, stepchild, adopted child, or eligible foster child
Adopted child - A child legally adopted, or a child lawfully placed by an authorized placement agency for legal adoption; this child is treated as a child by blood
Eligible foster child - A child placed by an authorized agency or by a judgment, decree, or other order of any court of competent jurisdiction
Following are the tests a child must meet to be considered your qualifying child for certain tax benefits:
Relationship Test - Your qualifying child must be your:
Child (per the uniform definition of a child) or descendant (for example, grandchild or great grandchild)
Sibling, half sibling, stepsibling, or descendant (for example, nephew or niece)
Age Test - Your qualifying child must be younger than you and
under age 19, or
a full-time student under age 24, or
any age if permanently and totally disabled*
*Note: If your child is permanently and totally disabled, they do not have to be younger than you.
Residency Test - Your qualifying child must have the same main home as you for more than half the year.
Support Test - Your qualifying child must not provide more than half of their own support.
Citizenship Test - Your qualifying child must be a U.S. citizen, a U.S. resident, a U.S. national, or a resident of Canada or Mexico.
Joint Return Test - Your qualifying child must not file a joint return unless there would be zero tax liability on both married filing separate returns (the return for your child and the return for your child's spouse), and the joint return is filed only to receive a refund only.
If a child is the qualifying child for you and another person, you will need to decide who will claim the tax benefits using that child. If both of you claim tax benefits using the same child, the IRS will apply the following tie-breaker rules to determine who can claim tax benefits using that child:
If only one of you is the child's parent, the parent can claim the benefits. If you are not the child's parent and the child is a qualifying child for both you and the parents, you may claim the child (as a qualifying relative not eligible for the tax credits related to a child) only if:
Neither parent will be claiming the child and are not required to file a tax return
Your adjusted gross income is higher than the adjusted gross income of both parents
*Note: If the parents are not living together, this test is applied to the parent the child lives with only.
If both of you are the child's parents and you do not file a joint return together:
The parent with whom the child lived the longest period of time during the year can claim the benefits.
If the child lived with both parents the same amount of time, the parent with the highest adjusted gross income can claim the benefits.
The special rule for divorced or separated parents is the only condition under which tax benefits for one qualifying child may be split between two taxpayers. Under this provision, if the custodial parent allows the noncustodial parent to claim the dependent exemption, the noncustodial parent can also claim the Child Tax Credit if they otherwise qualify. The custodial parent can use the Head of Household filing status and claim EIC and the Dependent and Child Care Credit if they meet the additional rules for each of these benefits.
Five tax benefits affecting children are impacted by this definition:
Head of Household filing status - Generally, a child is your qualifying child for the Head of Household if they meet all the tests listed above. Also, you must:
Be single or considered unmarried
Pay more than half the cost of keeping up the main home where you live with your qualifying child
Credit for Child and Dependent Care Expenses - A child is your qualifying child for the credit for Child and Dependent Care Expenses if they meet all the tests listed above except that for the Age Test. For this credit, the child must be under age 13; but may be any age if physically or mentally unable to care for themselves. Your spouse who was physically or mentally not able to care for themselves may also qualify you for this credit.
Child Tax Credit - A child is your qualifying child for the Child Tax Credit if they meet all the tests listed above except that for the Age Test - the child must be under age 17. Additionally, the child must be claimed as your dependent. If you are divorced or separated, different rules may apply.
Earned Income Credit - A child is your qualifying child for the Earned Income Credit if they meet all the Relationship, Age, and Residency Tests listed above. The Support Test does not apply. In addition, the child must be younger than you unless disabled and have lived with you in the U.S. for more than half the year. A qualifying child who is married must be your dependent or the dependent of their other parent.
Contact The Mobile Tax Man office for more information or assistance. 214-317-9927
Additional Child Tax Credit
You may qualify for a credit of up to $2,000 per qualifying child. A qualifying child is an individual who is under age 17 at the end of the year, is claimed as a dependent, and meets the definition of a child under the Uniform Definition of a Child as a son, daughter, stepchild, adopted child, grandchild or eligible foster child.
Earned Income Credit
About Publication 596, Earned Income Credit EIC
No Qualifying Children
The Earned Income Credit is a refundable credit for low-income workers with earned income. The credit is available for taxpayers with or without children. For 2019, the maximum credit if you do not have any qualifying children is $529
One Qualifying Child
The Earned Income Credit is a refundable credit for low-income workers with earned income. The credit is available for taxpayers with or without children. For 2019, the maximum credit if you have one qualifying child is $3,526
Three or More Qualifying Children
The earned income credit is a refundable credit for low-income workers with earned income. The credit is available for taxpayers with or without children. For 2019, the maximum credit if you have three or more qualifying children $6557
Although, combat pay is not included in income when calculating your federal income tax, you have the option of including combat pay as earned income when calculating the Earned Income Credit (EIC). You should calculate your return both ways (including and not including combat pay as earned income for EIC purposes) to determine which way gives you the more advantageous result.
Fraudulent or Reckless Claim
You will not be eligible for the Earned Income Credit if the IRS has determined that you have previously claimed the credit fraudulently or recklessly. A fraudulent claim results in a 10-year loss of eligibility. A reckless claim results in a two-year loss of eligibility.
Child Dependent Tax Credit
Additional Child Tax Credit - Refundable Credit
Publication 972, Child Tax Credit
List if you receive less than the maximum $2,000 per qualifying child for the Child Tax Credit because it is limited to your tax liability, you may be entitled to receive all or part of your remaining Child Tax Credit as a refundable Additional Child Tax Credit.
Adoption Credit at a Glance
If you pay for adoption expenses, you may be able to take a credit for qualified adoption expenses of up to $14.080 per child. If your modified adjusted gross income is $247,140 or more, you do not qualify for the credit. The credit is one of the nonrefundable personal credits and allows taxpayers to carry over any unused credits for up to five years. Returns with the adoption credit can be e-filed.
Child Care Expenses
Form 2441, Child and Dependent Care Expenses
If you are a working parent, or you were working and are now looking for work, you may be able to claim a credit for your child care. Expenses must be for a child under the age of 13 or a dependent that is unable to care for themselves. The credit may be as much as $1,050 for one qualifying child or $2,100 for more than one child, depending on your adjusted gross income.
In-Home Child Care
Did you pay someone to come into your home and provide child care while you work? If you do, you may actually be an employer who is required to pay employment taxes. If the person you pay provides care in their home, you would not be considered their employer.
Are you a working parent able to claim a credit for child care expenses? If so, you must provide the IRS with the are provider's name, address, and taxpayer identification number (TIN), which can be a Social Security number or an employer identification number (EIN).
Types of Provider Identification
If the care provider is a daycare center, the taxpayer identification number (TIN) is their employer identification number (EIN). If the provider is an individual, the TIN is usually the Social Security number. If the provider is a church or non-profit group and has no EIN, the words "tax exempt" can be substituted for the TIN.
Earned income for active duty military in a combat zone can be calculated two different ways for the credit for Child and Dependent Care Expenses. You can elect whether or not to include combat pay as earned income. This calculation may affect how much of your dependent care expenses are eligible for the credit. You should calculate your return both ways (including and not including combat pay as earned income) to determine which gives you the more advantageous result.
Do you pay child support? If you do, can that child be claimed as a dependent on your tax return? Child support is neither income to the recipient, nor a deduction for the payer. The custodial parent is the parent the child lives with more than half the year. In order to claim a dependency exemption a signed Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, must be included in the noncustodial parent's tax return.
Child Tax Credit - Combat Pay
Although combat pay is not included in income for purposes of calculating your federal income tax, combat pay is included as earned income when calculating the Additional Child Tax Credit. Because the amount of this credit is based in part on earned income, this could mean a higher credit for those with low taxable income.
Child Tax Credit - Qualifying Dependent
You may qualify for a credit of up to $2,000 for each qualifying child under age 17 at the end of the year. A qualifying child is your child, stepchild, adopted child, eligible foster child, or descendent of such, or your sibling, stepsibling, or descendent of such. The individual must have lived with you, or the custodial parent, for more than half of the year, must not have provided more than half of their own support, and must be claimed as a dependent by you. Generally, the child must be a U.S. citizen or a U.S. national or resident for some part of the year.
Children's Investment Credit
Does your child under age 18 have investment income? If they do, and the total amount is more than $3,600, part of the amount may be taxed at the parent's rate. The child may file a tax return, including Form 8615, Tax for Certain Children Who Have Unearned Income, or you may be able to file Form 8814, Parent's Election to Report Child's Interest and Dividends, and report your child's income on your return.
Standard Deduction- Dependent on Another's Return
The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally limited to the greater of (a) $1,100, or (b) the individual's earned income plus $350. In no case can the deduction exceed the single standard deduction amount.