NEW DEFINITION FOR “CHILD”
FOR CHOOSING YOUR FILING STATUS
By Donna
Stern, CPA
For many years, single parents
and single taxpayers who take
care of their parents, have been
able to utilize the lowest tax
rates by filing as Head of Household.
Effective January 1, 2005, there
are new requirements to determine
if you can file as Head of Household.
Here are the new rules for a
qualifying child for Head of
Household purposes:
- Gross income Test: This
test no longer applies for
purpose. This test is used
for dependency qualification.
- Relationship
Test: Child
includes the taxpayer’s
natural, step-child, adopted
or eligible foster child.
- Age
Test: Child
must be less than 19 years
old ormust be a full-time student
who is less than 24 years
old.
- Citizenship Test: The
child must be a citizen or
resident of the U.S. or a resident
of Canada or Mexico.
- Abode
Test: Child
must have the same principal
place of abode as the taxpayer
for more than half of the
taxable year.
- Support
Test: Child must
not have provided
more than one-half of his or
her own support during the
taxable
year.
- Joint return Test:
An individual who files a joint
return cannot be the qualifying
child.
Even though the child may not
qualify you to file as Head of
Household, that child could qualify
as your dependent. Dependency
rules includes the Gross income
test.
The table below can help to
determine if you can file as
Head of Household:
|
Must
live with T/P |
Must
be T/P’s dependent |
T/P’s
child under age 19, student
under age 24 |
YES |
NO |
Child
not a student and over
age 18 |
YES |
YES |
Parent |
NO
But
must provide more than ½ support |
YES |
Other
related individual |
YES |
YES |
Example: Jessica is 29 years
old and lives with her father
Tim. Jessica earns $24,000 per
year, but Tim pays the household
expenses. ANSWER: Jessica is
not Tim’s dependent because
she does not meet the gross income
test and Tim cannot use Head
of Household status because Jessica
is too old.
To make things worse, California
has not accepted this change. That
means you can file using one
filing status for federal and
a different one for California.
You can no longer assume your
kids qualify you for tax savings.
Please consult your tax advisor
in case you need to adjust your
tax withholdings with your employer.
This
Article New
Definition For “Child” For
Choosing Your Filing Status was
written by Donna
Stern, CPA
|
