1. Personal and Dependency Exemptions

2. Lesson Overview Documents Personal Exemption Dependent Exemption
Special Rules for claiming dependents

3. Required Documents Social Security Card, or
SSA 1099 benefit Statement, or SSA letter
Drivers licenses or passports are not acceptable
Individual Taxpayer Identification Number (ITIN)
Correct documentation and accuracy is important in preventing delays in processing

4. Individual Taxpayer Identification Number (ITIN)
For nonresidents or resident aliens who are not eligible for a SSN
ITIN is for tax purposes only
Does NOT:
Entitle you to Social Security Benefits
Entitle you to the Earned income tax credit
Create a presumption on immigration status
Give you the right to work in the U.S.

5. Individual Taxpayer Identification Number (ITIN)
Must have a (ITIN) if:
You must file a U.S. tax return, or
Listed on a tax return as a spouse or dependent
Do not have or cannot obtain a valid SSN

6. Dependency Exemptions
Personal Exemptions
Allows tax payers to claim yourself and your spouse (if married) as exemptions
Yourself = 1
Spouse = 1
Dependency Exemptions
Allows taxpayers to claim qualifying dependents as exemptions
Qualifying Child
Qualifying Relative

7. Personal Exemption Yourself: Spouse:
If you cannot be claimed as a dependent on another person tax return
Claim “0” if you can be claimed as a dependent
Spouse:
If he/she cannot be claimed as a dependent
Must be married by December 31 of tax year
Files a joint return or separate return with no gross income.

8. Personal Exemption
Note: One spouse is never considered the dependent of the other spouse
Divorced:
If divorced at end of tax year: Cannot claim exemption
Death:
If spouse died during the year and the taxpayer did not remarry by December 31: Can claim exemption

10. Dependency Exemptions
3 General Tests
Must be Citizen (SSN) or resident (ITIN)
Did not file a Joint Return
Cannot be claimed as a dependent by another taxpayer

11. Dependency Exemptions 1. Citizen or Resident Test
Must be a U.S. Citizen or
U.S. resident alien or
U.S. National or
resident of Canada or Mexico for Canada for at least some part of the year
Foreign exchange students generally are not U.S. residents and do not meet the citizen or resident test

12. Dependency Exemptions 2. Joint Return Test
Dependent cannot have filed a joint return for the tax year

13. Dependency Exemptions 3. Dependent Taxpayer Test
Cannot be claimed as a dependent if he/she can be claimed as a dependent by someone else.

14. Dependency Exemptions Qualifying Child vs. Qualifying Relative
4 test to determine if a dependent:
Member of household or relationship test
Not a qualifying child test
Gross income test
Support test
“Qualifying Child”
5 test to determine if a dependent:
Relationship test
Support test
Residency Test
Age Test
Special test

16. Dependency Exemptions Qualifying Child – 1. Relationship test
Must be the taxpayer’s:
Child, step child, or adopted child, or
Grandchild,, or
Brother, sister, stepbrother, step sister, or
Niece or nephew, or
Foster child placed with the taxpayer by authorized agency or court order
If a child is born alive at any time during the year he/she is a qualifying child. No exemption for still born.

17. Dependency Exemptions Qualifying Child – 2. Support test
Child cannot have provided more than half of his or hew own support during the tax year

18. Dependency Exemptions Qualifying Child – 3. Residency test
Must have lived with the taxpayer for more than half of the year.
Exceptions apply in certain cases for children of divorced, separated or unmarred parents

19. Dependency Exemptions Qualifying Child – 4. Age test
Must be under the age of 19, or
Under the age of 24 if they are a full-time student
Exceptions made for children who are permanently disabled
Full-time student: must attend school full time for some part of each of five calendar months. Does not have to be consecutive
Night school, on-the-job training, and correspondence schools generally do not count

20. Dependency Exemptions Qualifying Child 5
Dependency Exemptions Qualifying Child 5. Special test for qualifying children of more than one person
Only one person can claim the child as a qualifying child
Tax benefits:
Dependency exemption
Child tax credit
Head of household
Earned Income tax credit
Child and dependency care expense credit
Exclusion from income for dependent care benefits

21. Dependency Exemptions Qualifying Child – Tie breakers rules
Only one of the individuals is the parent
Parent
Both are parents
Parent that the child lived with longer in the year
Both are parents (equal time)
Parent with higher adjusted gross income (AGI)
None are parents
Person with the highest AGI

23. Dependency Exemptions Qualifying Relative 1
Dependency Exemptions Qualifying Relative 1. Membership of Household or relationship test
Be a relative of the tax payer, or
Lived with taxpayer as a member of the household for entire year
Persons on temporary absence is considered as living with the taxpayer
Attending school, taking vacations, hospital stay, military service
Person who died during the year and was a member of the household until death meets the test

24. Dependency Exemptions Qualifying Relative 1
Dependency Exemptions Qualifying Relative 1. Membership of Household or relationship test
Relatives that may live with taxpayer but are not required to live with taxpayer to meet test
Child, grandchild, great grandchild
Stepchild
Sibling, half sibling, step sibling
Parent, grandparent, or other direct ancestor
Sibling of your mother or father
Son or daughter of your brother or sister
Father-in-law, mother-in-law, son-in-law, daughter in law, brother-in-law, sister-in-law

25. Dependency Exemptions Qualifying Relative 2
Dependency Exemptions Qualifying Relative 2. Not a Qualifying Child Test
A child who is the qualifying child of another relative cannot be a qualifying relative
Can claim a child as a qualifying relative if parent:
Does not file an income tax return, or
Files a return only to get a refund

26. Dependency Exemptions Qualifying Relative 3. Gross Income Test
Generally the person cannot have income that equals or exceeds the exemption amount.
$4,050

27. Dependency Exemptions Qualifying Relative 4. Support Test
Taxpayer must have provided more than half the person’s total support for the entire year
Only the dependent’s own funds that are actually spent is counted (not $ earned and saved)

28. Dependency Exemptions Qualifying Relative 4. Support Test
Types of support:
Food, clothing
Shelter (at fair rental value)
Education
Medical and dental care
Recreation
Transportation
Furniture, appliances or autos
Food stamps, Medicaid, housing assistance are not considered support

29. Special Rules for Child of Divorced or Separated Parents
Parent who has custody of the child for the greater part of the year if the following conditions are met:
Received more than half of support from one or both parents
Parents are divorced, or legally separated
Child was in custody of one or both parents for more than half of the year

30. Filling in the 1040 form Personal Exemptions – line 6a, 6b
Dependency Exemptions – 6c
Qualifying Child
Qualifying Relative
Social Security numbers or Individual taxpayer identification numbers