New Rules for Qualifying Child

Tax Provisions in HR 6893 Signed Into Law Oct 7, 2008

In addition to the Emergency Economic Act of 2008, President Bush has signed a little known Act which contains a clarification of the uniform definition of a qualifying child for purposes of the dependency exemption, EITC, dependent care, and HH filing status. This change is buried in H.R. 6893 Fostering Connections to Success and Increasing Adoptions Act of 2008, (Public Law 110-351). The new definition is effective for tax years beginning after 2008.

1) Another age type of limit has been added to the definition of a “qualifying child”. Starting with 2009 income tax returns, an individual is NOT a qualifying child unless the individual is either 1) younger than the taxpayer claiming the individual, or 2) permanently and totally disabled.

For example: Sister is 19. Brother is age 20, a full time student, and not disabled. Assuming Brother meets all of the definitions of a qualifying child for 2008, he will not be a qualifying child for 2009 or later years because he is not younger than Sister. Sister may still be able to claim Brother as a dependent under the “qualifying relative” provision, but not as a “qualifying child”. Basically this eliminates Sister from being able to use the HH filing status in connection with Brother.

2) A new tie breaker type of rule has been added for the “qualifying child”. If a parent MAY CLAIM an individual as a qualifying child (“child”) but does not actually claim the child, another taxpayer may claim the child as a qualifying child only if that taxpayer 1) is otherwise eligible to claim the child AND 2) has a higher AGI for the tax year than any parent eligible to claim the child.

For example: Child, the child’s mother (Mother), and the child’s aunt (Aunt) all lived together the entire year. Ignoring this new rule, assume Child is a qualifying child of both. The person who claims Child gets the benefits of Child as a qualifying child for 2008. For 2009, the basic rule is still the same ­ if Mother does not claim Child, Aunt can claim Child. If Aunt’s AGI is lower than Mother’s, Aunt can only claim Child as a qualifying relative, not as a qualifying child. Basically this eliminates Aunt from being able to use the HH filing status in connection with Child as well as being denied the right to the child tax credit, child care credit, and EIC. If Aunt’s AGI is higher than Mother’s, Aunt can still claim Child as a qualifying child and receive all normal benefits related to Child.

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Need help with a Federal tax issue? Ashwaubenon Tax Professionals (David & Mary) offer a fee based consulting services.

This text has been shared with you courtesy of: David & Mary Mellem, EAs & Ashwaubenon Tax Professionals, 920-496-1065 (fax 920-496-9111) davidmellem@yahoo.com, marymellemea@yahoo.com, davidmellemea@yahoo.com, and marymellem@yahoo.com.

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