Publication 501 Contents Cat. No. 15000U What’s New for 2005 . . . . . . . . . . . . . . . 1 Department of the Reminders . . . . . . . . . . . . . . . . . . . . . . 2 Exemptions, Treasury Introduction . . . . . . . . . . . . . . . . . . . . . 2 Internal Revenue Standard Who Must File . . . . . . . . . . . . . . . . . . . 2 Service Who Should File . . . . . . . . . . . . . . . . . 4 Deduction, Filing Status . . . . . . . . . . . . . . . . . . . . 5 and Filing Exemptions . . . . . . . . . . . . . . . . . . . . . 9 Exemptions for Dependents . . . . . . . . . 10 Information Phaseout of Exemptions . . . . . . . . . . . . 19 Standard Deduction . . . . . . . . . . . . . . . 19 2005 Standard Deduction Tables . . . . 22 For use in preparing How To Get Tax Help . . . . . . . . . . . . . . 23 2005 Returns Index . . . . . . . . . . . . . . . . . . . . . . . . . . 25 What’s New for 2005 Exemption for dependent. Beginning in 2005, you will use new rules to determine whether you can claim an exemption for a de- pendent. You can claim an exemption for a “qualifying child” or a “qualifying relative.” See Exemptions for Dependents. Head of household filing status. Beginning in 2005, you will use new rules to determine whether someone is your qualifying person so you can claim head of household filing status. To be your qualifying person, a child generally must be your “qualifying child.” See Head of House- hold. Who must file. Generally, the amount of in- come you can receive before you must file a return has increased. Table 1 shows the filing requirements for most taxpayers. Exemption amount. The amount you can de- duct for each exemption has increased from $3,100 in 2004 to $3,200 in 2005. Exemption for individual displaced by Hurri- cane Katrina. You may be able to claim a $500 exemption if you provided housing to a person displaced by Hurricane Katrina. For de- tails, see Exemption for Individual Displaced by Hurricane Katrina. Exemption phaseout. You lose all or part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which this phaseout begins depends on your filing status. For 2005, the phaseout begins at $109,475 for married persons filing separately; $145,950 for single individuals; Get forms and other information $182,450 for heads of household; and $218,950 for married persons filing jointly or qualifying faster and easier by: widow(er)s. See Phaseout of Exemptions, later. Internet • www.irs.gov Standard deduction. The standard deduction for most taxpayers who do not itemize deduc- tions on Schedule A of Form 1040 is higher in claim; and the amount of the standard deduc- Nonresident aliens. If you were a nonresi- tion. dent alien at any time during the year, the rules 2005 than it was in 2004. The amount depends and tax forms that apply to you may be different on your filing status. The 2005 Standard Deduc- The first section of this publication explains from those that apply to U.S. citizens. See Publi- who must file an income tax return. If you have tion Tables are shown near the end of this publi- cation 519. little or no gross income, reading this section will cation as Tables 7, 8, and 9. help you decide if you have to file a return. Comments and suggestions. We welcome Itemized deductions. Some of your itemized The second section is about who should file your comments about this publication and your deductions may be limited if your adjusted gross a return. Reading this section will help you de- suggestions for future editions. income is more than $145,950 ($72,975 if you cide if you should file a return, even if you are not You can write to us at the following address: are married filing separately). See Who Should required to do so. Itemize, later. The third section helps you determine which Internal Revenue Service filing status to use. Filing status is important in Individual Forms and Publications Branch determining whether you must file a return, your SE:W:CAR:MP:T:I standard deduction, and your tax rate. It also 1111 Constitution Ave. NW, IR-6406 helps determine what credits you may be enti- Reminders Washington, DC 20224 tled to. The fourth section discusses exemptions, Election to report child’s unearned income We respond to many letters by telephone. which reduce your taxable income. on parent’s return. You may be able to in- Therefore, it would be helpful if you would in- The fifth section is about exemptions for de- clude your child’s interest and dividend income clude your daytime phone number, including the pendents. It explains the difference between a on your tax return by using Form 8814, Parents’ area code, in your correspondence. qualifying child and a qualifying relative. Other Election To Report Child’s Interest and Divi- You can email us at *taxforms@irs.gov. (The topics include the social security number re- dends. If you choose to do this, your child will not asterisk must be included in the address.) quirement for dependents, the rules for multiple have to file a return. Please put “Publications Comment” on the sub- support agreements, and the rules for divorced ject line. Although we cannot respond individu- or separated parents. Photographs of missing children. The Inter- ally to each email, we do appreciate your The sixth section gives the rules and dollar nal Revenue Service is a proud partner with the feedback and will consider your comments as amounts for the standard deduction — a benefit National Center for Missing and Exploited Chil- we revise our tax products. for taxpayers who do not itemize their deduc- dren. Photographs of missing children selected Tax questions. If you have a tax question, tions. This section also discusses the standard by the Center may appear in this publication on visit www.irs.gov or call 1-800-829-1040. We deduction for taxpayers who are blind or age 65 pages that would otherwise be blank. You can cannot answer tax questions at either of the or older, and special rules for dependents. In help bring these children home by looking at the addresses listed above. addition, this section should help you decide photographs and calling 1-800-THE-LOST whether you would be better off taking the stan- (1-800-843-5678) if you recognize a child. Ordering forms and publications. Visit dard deduction or itemizing your deductions. www.irs.gov/formspubs to download forms and The last section explains how to get tax help publications, call 1-800-829-3676, or write to the from the IRS. National Distribution Center at the address This publication is for U.S. citizens and resi- shown under How To Get Tax Help in the back Introduction dent aliens only. If you are a resident alien for of this publication. This publication discusses some tax rules that the entire year, you must follow the same tax affect every person who may have to file a fed- rules that apply to U.S. citizens. The rules to Useful Items eral income tax return. It answers some basic determine if you are a resident or nonresident You may want to see: questions: who must file; who should file; what alien are discussed in chapter 1 of Publication filing status to use; how many exemptions to 519, U.S. Tax Guide for Aliens. Publication ❏ 559 Survivors, Executors, and Table 1. 2005 Filing Requirements Chart for Most Taxpayers Administrators THEN file a return ❏ 929 Tax Rules for Children and if your gross Dependents AND at the end of 2005 you income was at Form (and Instructions) IF your filing status is... were...* least...** ❏ 1040X Amended U.S. Individual Income under 65 $ 8,200 single Tax Return 65 or older $ 9,450 ❏ 2848 Power of Attorney and Declaration of Representative under 65 $10,500 head of household ❏ 8332 Release of Claim to Exemption for 65 or older $11,750 Child of Divorced or Separated Parents under 65 (both spouses) $16,400 married, filing jointly*** ❏ 8814 Parents’ Election To Report Child’s 65 or older (one spouse) $17,400 Interest and Dividends 65 or older (both spouses) $18,400 ❏ 8914 Exemption Amount for Taxpayers Housing Individuals Displaced by married, filing separately any age $ 3,200 Hurricane Katrina under 65 $13,200 qualifying widow(er) with dependent child 65 or older $14,200 * If you were born before January 2, 1941, you are considered to be 65 or older at the end of 2005. Who Must File ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United If you are a U.S. citizen or resident, whether you States (even if you may exclude part or all of it). Do not include social security benefits unless must file a federal income tax return depends you are married filing a separate return and you lived with your spouse at any time during 2005. upon your gross income, your filing status, your *** If you didn’t live with your spouse at the end of 2005 (or on the date your spouse died) and age, and whether you are a dependent. For your gross income was at least $3,200, you must file a return regardless of your age. details, see Table 1 and Table 2. You also must Page 2 Gross income. Gross income is all income Table 2. 2005 Filing Requirements for Dependents you receive in the form of money, goods, prop- See Exemptions for Dependents to find out if you are a dependent. erty, and services that is not exempt from tax. If you are married and live with your spouse in a If your parent (or someone else) can claim you as a dependent, use this table to see community property state, half of any income if you must file a return. defined by state law as community income may In this table, unearned income includes taxable interest, ordinary dividends, and be considered yours. For a list of community capital gain distributions. Earned income includes wages, tips, and taxable property states, see Community property states scholarship and fellowship grants. Gross income is the total of your unearned and under Married Filing Separately, later. earned income. Self-employed persons. If you are Caution: If your gross income was $3,200 or more, you usually cannot be claimed self-employed in a business that provides serv- as a dependent unless you are a qualifying child. For details, see Exemptions for ices (where products are not a factor), your Dependents. gross income from that business is the gross receipts. If you are self-employed in a business involving manufacturing, merchandising, or min- Single dependents— Were you either age 65 or older or blind? ing, your gross income from that business is the ❏ No. You must file a return if any of the following apply. total sales minus the cost of goods sold. To this figure, you add any income from investments 1. Your unearned income was more than $800. and from incidental or outside operations or 2. Your earned income was more than $5,000. sources. 3. Your gross income was more than the larger of — You must file Form 1040 if you owe a. $800, or any self-employment tax. b. Your earned income (up to $4,750) plus $250. TIP Filing status. Your filing status generally de- ❏ Yes. You must file a return if any of the following apply. pends on whether you are single or married. In 1. Your unearned income was more than $2,050 ($3,300 if 65 or older and some cases, it depends on other factors as well. blind). Whether you are single or married is determined as of the last day of your tax year, which is 2. Your earned income was more than $6,250 ($7,500 if 65 or older and December 31 for most taxpayers. Filing status is blind). discussed in detail later in this publication. 3. Your gross income was more than $1,250 ($2,500 if 65 or older and blind) plus the larger of: Age. Age is a factor in determining if you must file a return only if you are 65 or older at the end a. $800, or of your tax year. For 2005, you are 65 or older if b. Your earned income (up to $4,750) plus $250. you were born before January 2, 1941. Filing Requirements Married dependents—Were you either age 65 or older or blind? for Most Taxpayers ❏ No. You must file a return if any of the following apply. You must file a return if your gross income for 1. Your gross income was at least $5 and your spouse files a separate the year was at least the amount shown on the return and itemizes deductions. appropriate line in Table 1. Dependents should 2. Your unearned income was more than $800. see Table 2 instead. 3. Your earned income was more than $5,000. 4. Your gross income was more than the larger of — Deceased Persons a. $800, or You must file an income tax return for a dece- b. Your earned income (up to $4,750) plus $250. dent (a person who died) if both of the following are true. ❏ Yes. You must file a return if any of the following apply. 1. You are the surviving spouse, executor, 1. Your gross income was at least $5 and your spouse files a separate administrator, or legal representative. return and itemizes deductions. 2. The decedent met the filing requirements 2. Your unearned income was more than $1,800 ($2,800 if 65 or older and described in this publication at the time of blind). his or her death. 3. Your earned income was more than $6,000 ($7,000 if 65 or older and For more information, see Final Return for blind). Decedent in Publication 559. 4. Your gross income was more than $1,000 ($2,000 if 65 or older and blind) plus the larger of: U.S. Citizens or a. $800 or Residents Living Abroad b. Your earned income (up to $4,750) plus $250. For purposes of determining whether you must file a return, you must include in your gross income all of the income you earned abroad, including any income you can exclude under the file if one of the situations described in Table 3 fail to file a return, you may be subject to criminal foreign earned income exclusion. For more in- applies. The filing requirements apply even if prosecution. formation on special tax rules that may apply to you owe no tax. For information on what form to use — Form you, see Publication 54, Tax Guide for U.S. You may have to pay a penalty if you are 1040EZ, Form 1040A, or Form 1040 — see the Citizens and Resident Aliens Abroad. required to file a return but fail to. If you willfully instructions in your tax package. Page 3 parents have the right to the earnings and may Table 3. Other Situations When You Must File a 2005 Return actually have received them. If the child does not pay the tax due on this income, the parent is If any of the four conditions listed below applied to you for 2005, you must file a liable for the tax. return. Unearned income. This is income such as 1. You owe any special taxes, such as: interest, dividends, and capital gains. Trust dis- tributions of interest, dividends, capital gains, and survivor annuities are considered unearned • Alternative minimum tax. (See the Form 1040 instructions for line 45.) income also. • Additional tax on a qualified plan, including an individual retirement Election to report child’s unearned income arrangement (IRA), or other tax-favored account. (See Publication 590, on parent’s return. You may be able to in- Individual Retirement Arrangements (IRAs), and Publication 969, Health clude your child’s interest and dividend income Savings Accounts and Other Tax-Favored Health Plans.) But if you are filing a on your tax return. If you choose to do this, your return only because you owe this tax, you can file Form 5329 by itself. child will not have to file a return. However, all of the following conditions must be met. • Social security or Medicare tax on tips you did not report to your employer. 1. Your child was under age 14 at the end of (See Publication 531, Reporting Tip Income.) 2005. (A child born on January 1, 1992, is considered to be age 14 at the end of • Write-in taxes, including uncollected social security, Medicare, or railroad 2005; you cannot make the election for this retirement tax on tips you reported to your employer or on group-term life child.) insurance. (See Publication 531 and the Form 1040 instructions for line 63.) 2. Your child is required to file a return for 2005 unless you make this election. • Household employment taxes. But if you are filing a return only because you 3. Your child had gross income only from in- owe these taxes, you can file Schedule H by itself. terest and dividends (including capital gain distributions and Alaska Permanent Fund • Recapture taxes. (See the Form 1040 instructions for lines 44 and 62.) dividends). 4. The interest and dividend income was less 2. You received any advance earned income credit (EIC) payments from your than $8,000. employer. These payments should be shown in box 9 of your Form W–2. (See Publication 596, Earned Income Credit.) 5. No estimated tax payment was made for 2005 and no 2004 overpayment was ap- 3. You had net earnings from self-employment of at least $400. (See Schedule SE plied to 2005 under your child’s name and (Form 1040) and its instructions.) social security number. 6. No federal income tax was withheld from 4. You had wages of $108.28 or more from a church or qualified church-controlled your child’s income under the backup with- organization that is exempt from employer social security and Medicare taxes. holding rules. (See Schedule SE (Form 1040) and its instructions.) 7. You are the parent whose return must be used when making the election to report your child’s unearned income. island government. See Publication 570 for Residents of Puerto Rico For more information, see Parent’s Election more information. Generally, if you are a U.S. citizen and a bona To Report Child’s Interest and Dividends in Pub- fide resident of Puerto Rico, you must file a U.S. lication 929, and Form 8814. Dependents income tax return if you meet the income re- quirements. This is in addition to any legal re- A person who is a dependent may still have to Other Situations quirement you may have to file an income tax file a return. This depends on the amount of the return with Puerto Rico. You may have to file a tax return even if your dependent’s earned income, unearned income, gross income is less than the amount shown in and gross income. For details, see Table 2. A If you are a bona fide resident of Puerto Rico Table 1 or Table 2 for your filing status. See dependent may also have to file if one of the for the whole year, your U.S. gross income does Table 3 for those other situations when you must situations described in Table 3 applies. not include income from sources within Puerto file. Rico. However, include in your U.S. gross in- Responsibility of parent. If a dependent come any income you received for your services child who must file an income tax return cannot as an employee of the United States or any U.S. file it for any reason, such as age, a parent, agency. If you receive income from Puerto Ri- guardian, or other legally responsible person Who Should File can sources that is not subject to U.S. tax, you must file it for the child. If the child cannot sign must reduce your standard deduction, which the return, the parent or guardian must sign the Even if you do not have to file, you should file a reduces the amount of income you can have child’s name followed by the words “By (your tax return if you can get money back. For exam- before you must file a U.S. income tax return. signature), parent for minor child.” ple, you should file if one of the following applies. For more information, see Publication 570, Tax Guide for Individuals With Income From Earned income. This is salaries, wages, pro- 1. You had income tax withheld from your U.S. Possessions. fessional fees, and other amounts received as pay. pay for work you actually perform. Earned in- 2. You made estimated tax payments for the come (only for purposes of filing requirements year or had any of your overpayment for Individuals With Income From U.S. and the standard deduction) also includes any last year applied to this year’s estimated Possessions part of a scholarship that you must include in tax. your gross income. See chapter 1 of Publication If you had income from Guam, the Common- 970, Tax Benefits for Education, for more infor- 3. You qualify for the earned income credit. wealth of Northern Mariana Islands, American mation on taxable and nontaxable scholarships. See Publication 596, Earned Income Samoa, or the U. S. Virgin Islands, special rules Credit (EIC), for more information. may apply when determining whether you must Child’s earnings. Amounts a child earns by file a U.S. federal income tax return. In addition, performing services are his or her gross income. 4. You qualify for the additional child tax you may have to file a return with the individual This is true even if under local law the child’s credit. See the instructions in your tax Page 4 forms package for more information on this household or as a qualifying widow(er) with a Form 1040. If you file Form 1040A or Form credit. dependent child. See Head of Household and 1040, show your filing status as single by check- Qualifying Widow(er) With Dependent Child to ing the box on line 1. Use the Single column of 5. You qualify for the health coverage tax see if you qualify. the Tax Table, or Section A of the Tax Computa- credit. For information about this credit, tion Worksheet, to figure your tax. see Form 8885, Health Coverage Tax Married persons. If you are considered mar- Credit. ried for the whole year, you and your spouse can Married Filing Jointly file a joint return, or you can file separate re- turns. You can choose married filing jointly as your filing status if you are married and both you and Considered married. You are considered your spouse agree to file a joint return. On a joint Filing Status married for the whole year if on the last day of return, you report your combined income and your tax year you and your spouse meet any one deduct your combined allowable expenses. You You must determine your filing status before you of the following tests. can file a joint return even if one of you had no can determine your filing requirements, stan- 1. You are married and living together as income or deductions. dard deduction (discussed later), and correct husband and wife. If you and your spouse decide to file a joint tax. You figure your correct tax by using the Tax return, your tax may be lower than your com- Computation Worksheet or the column in the 2. You are living together in a common law bined tax for the other filing statuses. Also, your Tax Table that applies to your filing status. marriage that is recognized in the state standard deduction (if you do not itemize deduc- You also use your filing status in determining where you now live or in the state where tions) may be higher, and you may qualify for tax whether you are eligible to claim certain other the common law marriage began. benefits that do not apply to other filing statuses. deductions and credits. 3. You are married and living apart, but not There are five filing statuses: If you and your spouse each have legally separated under a decree of di- income, you may want to figure your • Single, vorce or separate maintenance. tax both on a joint return and on sepa- TIP • Married Filing Jointly, 4. You are separated under an interlocutory rate returns (using the filing status of married (not final) decree of divorce. For purposes • Married Filing Separately, filing separately). You can choose the method of filing a joint return, you are not consid- that gives the two of you the lower combined tax. • Head of Household, and ered divorced. How to file. If you file as married filing jointly, • Qualifying Widow(er) With Dependent you can use Form 1040 or Form 1040A. If you Spouse died during the year. If your Child. have no dependents, are under 65 and not blind, spouse died during the year, you are considered If more than one filing status applies to you, and meet other requirements, you can file Form married for the whole year for filing status pur- choose the one that will give you the lowest tax. 1040EZ. If you file Form 1040 or Form 1040A, poses. show this filing status by checking the box on If you did not remarry before the end of the line 2. Use the Married filing jointly column of the Marital Status tax year, you can file a joint return for yourself Tax Table, or Section B of the Tax Computation and your deceased spouse. For the next 2 In general, your filing status depends on Worksheet, to figure your tax. years, you may be entitled to the special benefits whether you are considered unmarried or mar- described later under Qualifying Widow(er) With Spouse died during the year. If your spouse ried. A marriage means only a legal union be- Dependent Child. died during the year, you are considered mar- tween a man and a woman as husband and If you remarried before the end of the tax ried for the whole year and can choose married wife. year, you can file a joint return with your new filing jointly as your filing status. See Spouse spouse. Your deceased spouse’s filing status is died during the year, under Married persons, Unmarried persons. You are considered un- married filing separately for that year. earlier. married for the whole year if, on the last day of your tax year, you are unmarried or legally sepa- Married persons living apart. If you live Divorced persons. If you are divorced under rated from your spouse under a divorce or sepa- apart from your spouse and meet certain tests, a final decree by the last day of the year, you are rate maintenance decree. you may be considered unmarried. If this applies considered unmarried for the whole year and State law governs whether you are married to you, you can file as head of household even you cannot choose married filing jointly as your or legally separated under a divorce or separate though you are not divorced or legally sepa- filing status. maintenance decree. rated. If you qualify to file as head of household instead of as married filing separately, your Divorced persons. If you are divorced standard deduction will be higher. Also, your tax Filing a Joint Return under a final decree by the last day of the year, may be lower, and you may be able to claim the you are considered unmarried for the whole Both you and your spouse must include all of earned income credit. See Head of Household, year. your income, exemptions, and deductions on later. your joint return. Divorce and remarriage. If you obtain a divorce in one year for the sole purpose of filing Single Accounting period. Both of you must use the tax returns as unmarried individuals, and at the same accounting period, but you can use differ- time of divorce you intended to and did remarry Your filing status is single if, on the last day of ent accounting methods. each other in the next tax year, you and your the year, you are unmarried or legally separated Joint responsibility. Both of you may be held spouse must file as married individuals. from your spouse under a divorce or separate responsible, jointly and individually, for the tax maintenance decree, and you do not qualify for Annulled marriages. If you obtain a court and any interest or penalty due on your joint another filing status. To determine your marital decree of annulment, which holds that no valid return. One spouse may be held responsible for status on the last day of the year, see Marital marriage ever existed, you are considered un- all the tax due even if all the income was earned Status, earlier. married even if you filed joint returns for earlier by the other spouse. Your filing status may be single if you were years. You must file amended returns (Form widowed before January 1, 2005, and did not Divorced taxpayer. You may be held jointly 1040X) claiming single or head of household remarry in 2005. However, you might be able to and individually responsible for any tax, interest, status for all tax years affected by the annulment use another filing status that will give you a lower and penalties due on a joint return filed before that are not closed by the statute of limitations tax. See Head of Household and Qualifying your divorce. This responsibility may apply even for filing a tax return. The statute of limitations Widow(er) With Dependent Child, later, to see if if your divorce decree states that your former generally does not expire until 3 years after your you qualify. spouse will be responsible for any amounts due original return was filed. on previously filed joint returns. Head of household or qualifying widow(er) How to file. You can file Form 1040EZ (if you with dependent child. If you are considered have no dependents, are under 65 and not blind, Relief from joint responsibility. In some unmarried, you may be able to file as a head of and meet other requirements), Form 1040A, or cases, one spouse may be relieved of joint liabil- Page 5 ity for tax, interest, and penalties on a joint return other reason, you can sign for your spouse only Special Rules for items of the other spouse which were incor- if you are given a valid power of attorney (a legal If you choose married filing separately as your rectly reported on the joint return. You can ask document giving you permission to act for your filing status, the following special rules apply. for relief no matter how small the liability. spouse). Attach the power of attorney (or a copy Because of these special rules, you will usually There are three types of relief available. of it) to your tax return. You can use Form 2848. pay more tax on a separate return than if you 1. Innocent spouse relief, which applies to all used another filing status that you qualify for. Nonresident alien or dual-status alien. A joint filers. joint return generally cannot be filed if either 1. Your tax rate generally will be higher than 2. Separation of liability, which applies to joint spouse is a nonresident alien at any time during it would be on a joint return. filers who are divorced, widowed, legally the tax year. However, if one spouse was a 2. Your exemption amount for figuring the al- separated, or who have not lived together nonresident alien or dual-status alien who was ternative minimum tax will be half that al- for the 12 months ending on the date elec- married to a U.S. citizen or resident at the end of lowed to a joint return filer. tion of this relief is filed. the year, the spouses can choose to file a joint 3. You cannot take the credit for child and return. If you do file a joint return, you and your 3. Equitable relief, which applies to all joint dependent care expenses in most cases, filers who do not qualify for innocent spouse are both treated as U.S. residents for the and the amount that you can exclude from spouse relief or separation of liability and entire tax year. See chapter 1 of Publication 519. income under an employer’s dependent to married couples filing separate returns care assistance program is limited to in community property states. Married Filing Separately $2,500 (instead of $5,000 if you filed a joint You must file Form 8857, Request for Inno- return). You can choose married filing separately as cent Spouse Relief, to request any of these your filing status if you are married. This filing 4. You cannot take the earned income credit. kinds of relief. Publication 971, Innocent Spouse status may benefit you if you want to be respon- Relief, explains these kinds of relief and who 5. You cannot take the exclusion or credit for sible only for your own tax or if it results in less may qualify for them. adoption expenses in most cases. tax than filing a joint return. Signing a joint return. For a return to be 6. You cannot take the education credits (the If you and your spouse do not agree to file a considered a joint return, both husband and wife Hope credit and the lifetime learning joint return, you have to use this filing status generally must sign the return. credit), the deduction for student loan inter- unless you qualify for head of household status, est, or the tuition and fees deduction. discussed next. Spouse died before signing. If your spouse died before signing the return, the exec- You may be able to choose head of house- 7. You cannot exclude any interest income utor or administrator must sign the return for hold filing status if you live apart from your from qualified U.S. savings bonds that you your spouse. If neither you nor anyone else has spouse, meet certain tests, and are considered used for higher education expenses. yet been appointed as executor or administrator, unmarried (explained later, under Head of 8. If you lived with your spouse at any time you can sign the return for your spouse and Household). This can apply to you even if you during the tax year: enter “Filing as surviving spouse” in the area are not divorced or legally separated. If you where you sign the return. qualify to file as head of household, instead of as a. You cannot claim the credit for the eld- married filing separately, your tax may be lower, erly or the disabled. Spouse away from home. If your spouse is you may be able to claim the earned income away from home, you should prepare the return, b. You will have to include in income more sign it, and send it to your spouse to sign so that credit and certain other credits, and your stan- (up to 85%) of any social security or it can be filed on time. dard deduction will be higher. The head of equivalent railroad retirement benefits household filing status allows you to choose the you received, and Injury or disease prevents signing. If your standard deduction even if your spouse chooses spouse cannot sign because of injury or disease c. You cannot roll over amounts from a to itemize deductions. See Head of Household, and tells you to sign, you can sign your spouse’s traditional IRA into a Roth IRA. later, for more information. name in the proper space on the return followed by the words “By (your name), Husband (or Unless you are required to file sepa- 9. The following credits and deductions are Wife).” Be sure to also sign in the space pro- rately, you should figure your tax both reduced at income levels that are half of vided for your signature. Attach a dated state- ways (on a joint return and on sepa- TIP those for a joint return: ment, signed by you, to the return. The rate returns). This way you can make sure you statement should include the form number of the a. The child tax credit, are using the filing status that results in the return you are filing, the tax year, the reason lowest combined tax. However, you will gener- b. The retirement savings contributions your spouse cannot sign, and that your spouse ally pay more combined tax on separate returns credit, has agreed to your signing for him or her. than you would on a joint return for the reasons c. Itemized deductions, and listed under Special Rules, later. Signing as guardian of spouse. If you are the guardian of your spouse who is mentally d. The deduction for personal exemptions. incompetent, you can sign the return for your How to file. If you file a separate return, you spouse as guardian. generally report only your own income, exemp- 10. Your capital loss deduction limit is $1,500 tions, credits, and deductions on your individual (instead of $3,000 if you filed a joint re- Spouse in combat zone. If your spouse is turn). return. You can claim an exemption for your unable to sign the return because he or she is spouse if your spouse had no gross income and serving in a combat zone (such as the Persian 11. If your spouse itemizes deductions, you was not the dependent of another person. How- Gulf area, Yugoslavia, or Afghanistan), or a cannot claim the standard deduction. If you ever, if your spouse had any gross income or qualified hazardous duty area (Bosnia and Her- can claim the standard deduction, your ba- was the dependent of someone else, you cannot zegovina, Croatia, or Macedonia), and you do sic standard deduction is half the amount claim an exemption for him or her on your sepa- not have a power of attorney or other statement, allowed on a joint return. rate return. you can sign for your spouse. Attach a signed statement to your return that explains that your If you file as married filing separately, you Individual retirement arrangements (IRAs). spouse is serving in a combat zone. For more can use Form 1040A or Form 1040. Select this You may not be able to deduct all or part of your information on special tax rules for persons who filing status by checking the box on line 3 of contributions to a traditional IRA if you or your are serving in a combat zone, or who are in either form. You also must enter your spouse’s spouse was covered by an employee retirement missing status as a result of serving in a combat social security number and full name in the plan at work during the year. Your deduction is zone, get Publication 3, Armed Forces’ Tax spaces provided. Use the Married filing sepa- reduced or eliminated if your income is more Guide. rately column of the Tax Table or Section C of than a certain amount. This amount is much the Tax Computation Worksheet to figure your Other reasons spouse cannot sign. If lower for married individuals who file separately tax. your spouse cannot sign the joint return for any and lived together at any time during the year. Page 6 For more information, see How Much Can You If you qualify to file as head of house- poses of the earned income credit (unless you Deduct? in chapter 1 of Publication 590, Individ- hold, your tax rate usually will be meet the five tests listed earlier under Consid- ual Retirement Arrangements (IRAs). lower than the rates for single or mar- ered Unmarried). You are not entitled to the TIP ried filing separately. You will also receive a credit unless you file a joint return with your higher standard deduction than if you file as spouse and meet other qualifications. Rental activity losses. If you actively partici- single or married filing separately. See Publication 596 for more information. pated in a passive rental real estate activity that produced a loss, you generally can deduct the How to file. If you file as head of household, Choice to treat spouse as resident. You loss from your nonpassive income up to you can use either Form 1040A or Form 1040. are considered married if you choose to treat $25,000. This is called a special allowance. Indicate your choice of this filing status by your spouse as a resident alien. See chapter 1 However, married persons filing separate re- checking the box on line 4 of either form. Use the of Publication 519. turns who lived together at any time during the Head of a household column of the Tax Table or year cannot claim this special allowance. Mar- Section D of the Tax Computation Worksheet to ried persons filing separate returns who lived figure your tax. Keeping Up a Home apart at all times during the year are each al- lowed a $12,500 maximum special allowance To qualify for head of household status, you for losses from passive real estate activities. must pay more than half of the cost of keeping Considered Unmarried See Rental Activities in Publication 925, Passive up a home for the year. You can determine Activity and At-Risk Rules. To qualify for head of household status, you whether you paid more than half of the cost of must be either unmarried or considered unmar- keeping up a home by using the following work- ried on the last day of the year. You are consid- Community property states. If you live in Ari- sheet. ered unmarried on the last day of the tax year if zona, California, Idaho, Louisiana, Nevada, you meet all the following tests. New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be consid- Cost of Keeping Up a Home 1. You file a separate return (defined, earlier, ered separate income or community income for under Joint Return After Separate Re- income tax purposes. See Publication 555, turns). Amount Community Property. You Total 2. You paid more than half the cost of keep- Paid Cost ing up your home for the tax year. Joint Return After Property taxes $ $ 3. Your spouse did not live in your home dur- Separate Returns Mortgage interest expense ing the last 6 months of the tax year. Your Rent spouse is considered to live in your home You can change your filing status by filing an Utility charges even if he or she is temporarily absent due amended return using Form 1040X. Upkeep and repairs to special circumstances. See Temporary If you or your spouse (or both of you) file a Property insurance absences, later. separate return, you generally can change to a Food consumed joint return any time within 3 years from the due 4. Your home was the main home of your on the premises date of the separate return or returns. This does child, stepchild, or eligible foster child for Other household expenses not include any extensions. A separate return more than half the year. (See Home of Totals $ $ includes a return filed by you or your spouse qualifying person, later, for rules applying claiming married filing separately, single, or to a child’s birth, death, or temporary ab- Minus total amount you ( ) head of household filing status. sence during the year.) paid 5. You must be able to claim an exemption Amount others paid $ for the child. However, you meet this test if Separate Returns you cannot claim the exemption only be- After Joint Return cause the noncustodial parent can claim If the total amount you paid is more than the amount Once you file a joint return, you cannot choose the child using the rules described later in others paid, you meet the requirement of paying more to file separate returns for that year after the due Children of divorced or separated parents than half the cost of keeping up the home. date of the return. under Qualifying Child or in Support Test for Children of Divorced or Separated Par- ents under Qualifying Relative. The gen- Exception. A personal representative for a Costs you include. Include in the cost of up- eral rules for claiming an exemption for a decedent can change from a joint return elected keep expenses such as rent, mortgage interest, dependent are explained later under Ex- by the surviving spouse to a separate return for real estate taxes, insurance on the home, re- emptions for Dependents. the decedent. The personal representative has pairs, utilities, and food eaten in the home. 1 year from the due date of the return to make If you were considered married for the change. See Publication 559 for more infor- Costs you do not include. Do not include in part of the year and lived in a commu- mation on filing income tax returns for a dece- the cost of upkeep expenses such as clothing, nity property state (listed earlier under dent. CAUTION ! education, medical treatment, vacations, life in- Married Filing Separately), special rules may surance, or transportation. Also, do not include apply in determining your income and expenses. the rental value of a home you own or the value Head of Household See Publication 555 for more information. of your services or those of a member of your You may be able to file as head of household if household. Nonresident alien spouse. You are consid- you meet all the following requirements. Also do not include any government or chari- ered unmarried for head of household purposes table assistance you received because of your if your spouse was a nonresident alien at any 1. You are unmarried or “considered unmar- temporary relocation due to Hurricane Katrina. time during the year and you do not choose to ried” on the last day of the year. treat your nonresident spouse as a resident 2. You paid more than half the cost of keep- alien. However, your spouse is not a qualifying Qualifying Person ing up a home for the year. person for head of household purposes. You must have another qualifying person and meet 3. A “qualifying person” lived with you in the See Table 4 to see who is a qualifying person. the other tests to be eligible to file as a head of home for more than half the year (except Any person not described in Table 4 is not a household. for temporary absences, such as school). qualifying person. However, if the “qualifying person” is your Earned income credit. Even if you are con- dependent parent, he or she does not sidered unmarried for head of household pur- Home of qualifying person. Generally, the have to live with you. See Special rule for poses because you are married to a nonresident qualifying person must live with you for more parent, later, under Qualifying Person. alien, you are still considered married for pur- than half of the year. Page 7 Special rule for parent. If your qualifying ary 1 until her death, and you can claim an This treatment applies for all years until the person is your father or mother, you may be child is returned. However, the last year this exemption for her, you can file as a head of eligible to file as head of household even if your treatment can apply is the earlier of: household. father or mother does not live with you. How- Temporary absences. You and your quali- 1. The year there is a determination that the ever, you must be able to claim an exemption for fying person are considered to live together child is dead, or your father or mother. Also, you must pay more even if one or both of you are temporarily absent than half the cost of keeping up a home that was 2. The year the child would have reached from your home due to special circumstances the main home for the entire year for your father age 18. such as illness, education, business, vacation, or mother. You are keeping up a main home for or military service. It must be reasonable to your father or mother if you pay more than half assume that the absent person will return to the Married child. Your child who is married at the the cost of keeping your parent in a rest home or home after the temporary absence. You must end of the year generally cannot be your qualify- home for the elderly. ing person unless you can claim the child as a continue to keep up the home during the ab- Death or birth. You may be eligible to file as dependent. However, the child is a qualifying sence. head of household if the individual who qualifies person if all three of the following requirements Kidnapped child. You may be eligible to file you for this filing status is born or dies during the are met. as head of household, even if the child who is year. You must have provided more than half of your qualifying person has been kidnapped. You • The child is your qualifying child (as de- the cost of keeping up a home that was the can claim head of household filing status if all fined under Exemptions for Dependents), individual’s main home for more than half of the the following statements are true. later. year, or, if less, the period during which the individual lived. • The child does not file a joint return, un- 1. The child must be presumed by law en- less the return is filed only as a claim for forcement authorities to have been kid- Example. You are unmarried. Your mother, refund and no tax liability would exist for napped by someone who is not a member for whom you can claim an exemption, lived in either spouse if they had filed separate of your family or the child’s family. an apartment by herself. She died on Septem- returns. ber 2. The cost of the upkeep of her apartment 2. In the year of the kidnapping, the child • The child is a U.S. citizen or resident, or a for the year until her death was $6,000. You paid lived with you for more than half the part of resident of Canada or Mexico. (This re- $4,000 and your brother paid $2,000. Your the year before the kidnapping. quirement is met if you are a U.S. citizen brother made no other payments towards your 3. You would have qualified for head of and the child is an adopted child who lived mother’s support. Your mother had no income. with you all year as a member of your household filing status if the child had not Because you paid more than half of the cost of household.) keeping up your mother’s apartment from Janu- been kidnapped. Table 4. Who Is a Qualifying Person for Filing as Head of Household?1 Caution: See the text of this publication for the other requirements you must meet to claim head of household filing status. IF the person is your . . . AND . . . THEN that person is . . . he or she is single a qualifying person, whether or not you can qualifying child (such as a son, claim an exemption for the person. daughter, or grandchild who lived with you more than half the year and he or she is married and you can claim an a qualifying person. meets certain other tests)2 exemption for him or her he or she is married and you cannot claim an not a qualifying person. 3 exemption for him or her you can claim an exemption for him or her a qualifying person.5 qualifying relative 4 who is your father or mother you cannot claim an exemption for him or not a qualifying person. her he or she lived with you more than half the a qualifying person. qualifying relative 4 other than your year, and you can claim an exemption for father or mother (such as a him or her 7 grandparent, brother, or sister who meets certain tests)6 he or she did not live with you more than half not a qualifying person. the year you cannot claim an exemption for him or not a qualifying person. her 1A person cannot qualify more than one taxpayer to use the head of household filing status for the year. 2The term “qualifying child” is defined under Exemptions for Dependents, later. Note: If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of divorced or separated parents under Qualifying Child, later. If you are the custodial parent and those rules apply, the child generally is your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. 3 This person is a qualifying person if the requirements described under Married child are met. 4The term “qualifying relative” is defined under Exemptions for Dependents, later. 5See Special rule for parent for an additional requirement. 6A person who is your qualifying relative only because he or she lived with you all year as a member of your household is not a qualifying person. 7If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Multiple Support Agreement. Page 8 may qualify for any of the exemptions discussed Qualifying Widow(er) 1. The child must be presumed by law en- here. With Dependent Child forcement authorities to have been kid- napped by someone who is not a member Nonresident aliens. Generally, if you are a If your spouse died in 2005, you can use married of your family or the child’s family. nonresident alien (other than a resident of Can- filing jointly as your filing status for 2005 if you ada or Mexico, or certain residents of India, 2. In the year of the kidnapping, the child otherwise qualify to use that status. The year of Japan, or Korea), you can qualify for only one lived with you for more than half the part of death is the last year for which you can file jointly personal exemption for yourself. You cannot the year before the kidnapping. with your deceased spouse. See Married Filing claim exemptions for a spouse or dependents. Jointly, earlier. 3. You would have qualified for qualifying These restrictions do not apply if you are a You may be eligible to use qualifying widow(er) with dependent child filing status nonresident alien married to a citizen or resident widow(er) with dependent child as your filing if the child had not been kidnapped. of the United States and have chosen to be status for 2 years following the year your spouse treated as a resident of the United States. died. For example, if your spouse died in 2004 As mentioned earlier, this filing status and you have not remarried, you may be able to Residents of Japan. Beginning in 2005, is available for only 2 years following use this filing status for 2005 and 2006. The nonresident aliens who are residents of Japan the year your spouse died. CAUTION ! rules for using this filing status are explained in generally cannot claim an exemption for a detail here. spouse or dependent. However, if you choose to This filing status entitles you to use joint have the old U.S.-Japan treaty apply in its en- return tax rates and the highest standard deduc- tirety for 2005, you may be able to claim these Exemptions tion amount (if you do not itemize deductions). exemptions for 2005. This status does not entitle you to file a joint Exemptions reduce your taxable income. Gen- More information. For more information on return. erally, you can deduct $3,200 for each exemp- exemptions if you are a nonresident alien, see How to file. If you file as a qualifying widow(er) tion you claim in 2005. If you are entitled to two chapter 5 in Publication 519. with dependent child, you can use either Form exemptions for 2005, you would deduct $6,400 1040A or Form 1040. Indicate your filing status Dual-status taxpayers. If you have been both ($3,200 × 2). But you may lose the benefit of part by checking the box on line 5 of either form. Use a nonresident alien and a resident alien in the or all of your exemptions if your adjusted gross the Married filing jointly column of the Tax Table same tax year, you should get Publication 519 income is above a certain amount. See or Section B of the Tax Computation Worksheet for information on determining your exemptions. Phaseout of Exemptions, later. to figure your tax. You usually can claim exemptions for your- self, your spouse, and each person you can Personal Exemptions Eligibility rules. You are eligible to file your claim as a dependent. 2005 return as a qualifying widow(er) with de- You are generally allowed one exemption for pendent child if you meet all the following tests. Types of exemptions. There are two types of yourself and, if you are married, one exemption exemptions: personal exemptions and exemp- for your spouse. These are called personal ex- 1. You were entitled to file a joint return with tions for dependents. While each is worth the emptions. your spouse for the year your spouse died. same amount ($3,200 for 2005), different rules, It does not matter whether you actually discussed later, apply to each type. filed a joint return. Your Own Exemption Who cannot claim a personal exemption. If 2. Your spouse died in 2003 or 2004 and you you are entitled to claim an exemption for a did not remarry before the end of 2005. You can take one exemption for yourself unless dependent (such as your child), that dependent you can be claimed as a dependent by another 3. You have a child or stepchild for whom you cannot claim a personal exemption on his or her taxpayer. If another taxpayer is entitled to claim can claim an exemption. This does not in- own tax return. you as a dependent, you cannot take an exemp- clude a foster child. tion for yourself even if the other taxpayer does Exemption for individual displaced by Hurri- 4. You paid more than half of the cost of not actually claim you as a dependent. cane Katrina. You may be able to claim a keeping up a home that was the main $500 exemption if you provided housing to a home for you and that child for the entire person displaced by Hurricane Katrina. For de- year, except for temporary absences. See Your Spouse’s Exemption tails, see Exemption for Individual Displaced by Temporary absences and Keeping Up a Hurricane Katrina, later. Your spouse is never considered your depen- Home, discussed earlier under Head of dent. Household. How to claim exemptions. How you claim an exemption on your tax return depends on which Joint return. On a joint return, you can claim form you file. Example. John Reed’s wife died in 2003. one exemption for yourself and one for your John has not remarried. He has continued dur- Form 1040EZ filers. If you file Form spouse. ing 2004 and 2005 to keep up a home for himself 1040EZ, the exemption amount is combined and his child for whom he can claim an exemp- with the standard deduction and entered on line Separate return. If you file a separate return, tion. For 2003 he was entitled to file a joint return 5. you can claim the exemption for your spouse for himself and his deceased wife. For 2004 and only if your spouse had no gross income, is not Form 1040A filers. If you file Form 1040A, 2005, he can file as a qualifying widower with a filing a return, and was not the dependent of complete lines 6a through 6d. The total number dependent child. After 2005, he can file as head another taxpayer. This is true even if the other of exemptions you can claim is the total in the of household if he qualifies. taxpayer does not actually claim your spouse as box on line 6d. Also complete line 26 by multiply- a dependent. This is also true if your spouse is a Death or birth. You may be eligible to file as a ing the number in the box on line 6d by $3,200. If nonresident alien. qualifying widow(er) with dependent child if the your adjusted gross income is more than child who qualifies you for this filing status is $109,475, see Phaseout of Exemptions, later. Head of household. If you qualify for head born or dies during the year. You must have of household filing status because you are con- Form 1040 filers. If you file Form 1040, provided more than half of the cost of keeping up sidered unmarried, you can claim an exemption complete lines 6a through 6d. On line 42, multi- a home that was the child’s main home during for your spouse if the conditions described in the ply the total exemptions shown in the box on line the entire part of the year he or she was alive. preceding paragraph are satisfied. 6d by $3,200 and enter the result. If your ad- Kidnapped child. You may be eligible to file To claim the exemption for your spouse, justed gross income is more than $109,475, see as a qualifying widow(er) with dependent child, check the box on line 6b of Form 1040 or Form Phaseout of Exemptions, later. even if the child who qualifies you for this filing 1040A and enter the name of your spouse in the status has been kidnapped. You can claim quali- U.S. citizen or resident. If you are a U.S. space to the right of the box. Enter the SSN or fying widow(er) with dependent child filing status citizen, U.S. resident, U.S. national (defined ITIN of your spouse in the space provided at the if all the following statements are true. later) or a resident of Canada or Mexico, you top of Form 1040 or Form 1040A. Page 9 Table 5. Overview of the Rules for Claiming an Exemption for a Dependent Caution: This table is only an overview of the rules. For details, see the rest of this publication. • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. • You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident, U.S. national, or a resident of Canada or Mexico, for some part of the year.1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. Tests To Be a Qualifying Child Tests To Be a Qualifying Relative 1. The child must be your son, daughter, stepchild, eligible 1. The person cannot be your qualifying child or the foster child, brother, sister, half brother, half sister, qualifying child of anyone else. stepbrother, stepsister, or a descendant of any of them. 2. The person either (a) must be related to you in one of the 2. The child must be (a) under age 19 at the end of the year, ways listed under Relatives who do not have to live with (b) under age 24 at the end of the year and a full-time you, or (b) must live with you all year as a member of student, or (c) any age if permanently and totally your household.2 disabled. 3. The person’s gross income for the year must be less than 3. The child must have lived with you for more than half of $3,200.3 the year.2 4. You must provide more than half of the person’s total 4. The child must not have provided more than half of his or support for the year.4 her own support for the year. 5. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child. 1There is an exception for certain adopted children. 2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents, and kidnapped children. 3There is an exception if the person is disabled and has income from a sheltered workshop. 4There is an exception for multiple support agreements. Death of spouse. If your spouse died during placed by Hurricane Katrina. You cannot claim exemption for a dependent even if your depen- the year, you generally can claim your spouse’s dent files a return. this amount for housing your spouse or any of exemption under the rules just explained in Joint Beginning in 2005, the term “dependent” your dependents. return and Separate return. means: You can claim this exemption for up to four If you remarried during the year, you cannot individuals. You may be able to take this exemp- • A qualifying child, or take an exemption for your deceased spouse. tion if all of the following are true. If you are a surviving spouse without gross • A qualifying relative. • You provided housing in your main home income and you remarry in the year your spouse The terms “qualifying child” and “qualifying rela- free of charge for at least 60 consecutive died, you can be claimed as an exemption on tive” are defined later. days in 2005 to a person displaced by both the final separate return of your deceased spouse and the separate return of your new Hurricane Katrina. You can claim an exemption for a qualifying spouse for that year. If you file a joint return with child or qualifying relative only if these three • The person lived in the Hurricane Katrina your new spouse, you can be claimed as an tests are met. disaster area on August 28, 2005. exemption only on that return. 1. Dependent taxpayer test. • You did not receive rent or any other Divorced or separated spouse. If you ob- amount for providing the housing. 2. Joint return test. tained a final decree of divorce or separate maintenance by the end of the year, you cannot 3. Citizen or resident test. To claim this amount, file Form 8914. For take your former spouse’s exemption. This rule more information, see Publication 4492. These three tests are explained in detail later. applies even if you provided all of your former All the requirements for claiming an exemp- spouse’s support. tion for a dependent are summarized in Table 5. Exemption for Individual Dependent not allowed a personal Exemptions for Displaced by Hurricane exemption. If you can claim an ex- Dependents emption for your dependent, the de- Katrina CAUTION ! pendent cannot claim his or her own exemption You are allowed one exemption for each person You may be able to take an exemption amount on his or her own tax return. This is true even if you can claim as a dependent. You can claim an of $500 for providing housing to a person dis- you do not claim the dependent’s exemption on Page 10 your return or if the exemption will be reduced or child was born in a foreign country. If so, this test dent, he does not meet the age test because, at eliminated under the phaseout rule described is met. the end of the year, he was not under age 19. under Phaseout of Exemptions, later. Full-time student. A full-time student is a stu- Foreign students’ place of residence. For- dent who is enrolled for the number of hours or Housekeepers, maids, or servants. If these eign students brought to this country under a courses the school considers to be full-time at- people work for you, you cannot claim exemp- qualified international education exchange pro- tendance. tions for them. gram and placed in American homes for a tem- porary period generally are not U.S. residents Student defined. To qualify as a student, Child tax credit. You may be entitled to a child and do not meet this test. You cannot claim an your child must be, during some part of each of tax credit for each qualifying child who was exemption for them. However, if you provided a any 5 calendar months of the year: under age 17 at the end of the year. For more home for a foreign student, you may be able to information, see the instructions in your tax take a charitable contribution deduction. See 1. A full-time student at a school that has a forms package. Expenses Paid for Student Living With You in regular teaching staff, course of study, and Publication 526, Charitable Contributions. a regularly enrolled student body at the school, or U.S. national. Dependent Taxpayer Test 2. A student taking a full-time, on-farm train- A U.S. national is an individual who, although ing course given by a school described in If you could be claimed as a dependent by an- not a U.S. citizen, owes his or her allegiance to (1), or by a state, county, or local govern- other person, you cannot claim anyone else as a the United States. U.S. nationals include Ameri- ment agency. dependent. Even if you have a qualifying child or can Samoans and Northern Mariana Islanders qualifying relative, you cannot claim that person who chose to become U.S. nationals instead of The 5 calendar months do not have to be con- as a dependent. U.S. citizens. secutive. If you are filing a joint return and your spouse Hurricane Katrina. If your child enrolled in could be claimed as a dependent by someone Qualifying Child school before August 25, 2005, the child is else, you and your spouse cannot claim any treated as a student for any month of the enroll- dependents on your joint return. There are five tests that must be met for a child ment period he or she was unable to attend to be your qualifying child. The five tests are: classes because of Hurricane Katrina. Joint Return Test 1. Relationship, School defined. A school can be an ele- mentary school, junior and senior high school, 2. Age, You generally cannot claim a married person as college, university, or technical, trade, or a dependent if he or she files a joint return. 3. Residency, mechanical school. However, an on-the-job training course, correspondence school, or In- 4. Support, and Example. You supported your 18-year-old ternet school does not count as a school. daughter, and she lived with you all year while 5. Special test for qualifying child of more her husband was in the Armed Forces. The Vocational high school students. Stu- than one person. couple files a joint return. Even though your dents who work on “co-op” jobs in private indus- These tests are explained next. daughter is your qualifying child, you cannot try as a part of a school’s regular course of take an exemption for her. classroom and practical training are considered full-time students. Exception. The joint return test does not Relationship Test apply if a joint return is filed by the dependent Permanently and totally disabled. Your and his or her spouse merely as a claim for To meet this test, a child must be: child is permanently and totally disabled if both refund and no tax liability would exist for either of the following apply. • Your son, daughter, stepchild, eligible fos- spouse on separate returns. ter child, or a descendant (for example, • He or she cannot engage in any substan- your grandchild) of any of them, or tial gainful activity because of a physical or Example. Your son and his wife each had mental condition. less than $3,000 of wages and no unearned • Your brother, sister, half brother, half sis- income. Neither is required to file a tax return. ter, stepbrother, stepsister, or a descen- • A doctor determines the condition has Taxes were taken out of their pay, so they filed a dant (for example, your niece or nephew) lasted or can be expected to last continu- joint return to get a refund. You are not disquali- of any of them. ously for at least a year or can lead to fied from claiming their exemptions just because death. they filed a joint return. Adopted child. An adopted child is always treated as your own child. The term “adopted Residency Test child” includes a child who was lawfully placed Citizen or Resident Test with you for legal adoption. To meet this test, your child must have lived with you for more than half of the year. There are You cannot claim a person as a dependent un- Eligible foster child. An eligible foster child is exceptions for temporary absences, children less that person is a U.S. citizen, U.S. resident, an individual who is placed with you by an au- who were born or died during the year, kid- U.S. national, or a resident of Canada or Mexico, thorized placement agency or by judgment, de- napped children, and children of divorced or for some part of the year. However, there is an cree, or other order of any court of competent separated parents. exception for certain adopted children, as ex- jurisdiction. plained next. Temporary absences. Your child is consid- ered to have lived with you during periods of Adopted child. If you are a U.S. citizen who time when one of you, or both, are temporarily has legally adopted a child who is not a U.S. Age Test absent due to special circumstances such as: citizen, U.S. resident, or U.S. national, this test is To meet this test, a child must be: met if the child lived with you as a member of • Illness, your household all year. This also applies if the • Under age 19 at the end of the year, • Education, child was lawfully placed with you for legal adop- • A full-time student under age 24 at the end tion. • Business, of the year, or Child’s place of residence. Children usually • Vacation, or • Permanently and totally disabled at any are citizens or residents of the country of their time during the year, regardless of age. • Military service. parents. If you were a U.S. citizen when your child was born, the child may be a U.S. citizen even if Example. Your son turned 19 on December Death or birth of child. A child who was born the other parent was a nonresident alien and the 10. Unless he was disabled or a full-time stu- or died during the year is treated as having lived Page 11 with you all year if your home was the child’s (containing the information required by the form) qualifying child is not a qualifying child for any- home the entire time he or she was alive during to make the written declaration to release the one else except your spouse with whom you file the year. The same is true if the child lived with exemption to the noncustodial parent. a joint return. you all year except for any required hospital stay The exemption can be released for 1 year, If a child is treated as the qualifying following birth. for a number of specified years (for example, child of the noncustodial parent under alternate years), or for all future years, as speci- Child born alive. You may be able to claim the rules for children of divorced or CAUTION ! fied in the declaration. an exemption for a child who was born alive separated parents described earlier, see Apply- Custodial parent and noncustodial parent. during the year, even if the child lived only for a ing this special test to divorced or separated The custodial parent is the parent with whom the moment. State or local law must treat the child parents, later. child lived for the greater part of the year. The as having been born alive. There must be proof Sometimes, a child meets the relationship, other parent is the noncustodial parent. of a live birth shown by an official document, age, residency, and support tests to be a qualify- If the parents divorced or separated during such as a birth certificate. The child must be ing child of more than one person. Although the the year and the child lived with both parents your qualifying child or qualifying relative, and all child is a qualifying child of each of these per- before the separation, the custodial parent is the the other tests to claim an exemption for a de- sons, only one person can actually treat the child one with whom the child lived for the greater part pendent must be met. as a qualifying child. To meet this special test, of the rest of the year. you must be the person who can treat the child Stillborn child. You cannot claim an ex- as a qualifying child. emption for a stillborn child. Example. Your child lived with you for 10 If you and another person have the same months of the year. The child lived with your Kidnapped child. You can treat your child as qualifying child, you and the other person(s) can former spouse for the other 2 months. You are meeting the residency test even if the child has decide which of you will treat the child as a considered the custodial parent. been kidnapped, but both of the following state- qualifying child. That person can take all of the ments must be true. Parents who never married. This special following tax benefits (provided the person is rule for divorced or separated parents also ap- eligible for each benefit) based on the qualifying 1. The child is presumed by law enforcement plies to parents who never married. child. authorities to have been kidnapped by someone who is not a member of your • The exemption for the child. family or the child’s family. Support Test (To Be a Qualifying • The child tax credit. 2. In the year the kidnapping occurred, the Child) • Head of household filing status. child lived with you for more than half of To meet this test, the child cannot have provided the part of the year before the date of the • The credit for child and dependent care more than half of his or her own support for the kidnapping. expenses. year. This treatment applies for all years until the • The earned income credit. This test is different from the support test to child is returned. However, the last year this be a qualifying relative, which is described later. The other person cannot take any of these bene- treatment can apply is the earlier of: However, to see what is or is not support, see fits based on this qualifying child. In other words, Support Test (To Be a Qualifying Relative), 1. The year there is a determination that the you and the other person cannot agree to divide later. If you are not sure whether a child provided child is dead, or these tax benefits between you. more than half of his or her own support, you 2. The year the child would have reached If you and the other person(s) cannot agree on may find Worksheet 1 helpful. age 18. who will claim the child and more than one Scholarships. A scholarship received by a person files a return claiming the same child, the child who is a full-time student is not taken into Children of divorced or separated parents. IRS will disallow all but one of the claims using account in determining whether the child pro- A child will be treated as the qualifying child of the tie-breaker rule in Table 6. vided more than half of his or her own support. his or her noncustodial parent if all of the follow- Example 1—child lived with parent and ing apply. grandparent. You and your 3-year-old daugh- Special Test for Qualifying Child of 1. The parents: ter Jade lived with your mother all year. You are More Than One Person 25 years old and earned $9,000 for the year. a. Are divorced or legally separated under Jade is a qualifying child of both you and your a decree of divorce or separate mainte- If your qualifying child is not a qualify- mother because she meets the relationship, nance, ing child for anyone else, this test age, residency, and support tests for both you does not apply to you and you do not and your mother. However, only one of you can b. Are separated under a written separa- TIP need to read about it. This is also true if your claim her. You agree to let your mother claim tion agreement, or c. Lived apart at all times during the last 6 Table 6. When More Than One Person Files a Return Claiming the Same months of the year. Qualifying Child (Tie-Breaker Rule) 2. The child received over half of his or her Caution. If a child is treated as the qualifying child of the noncustodial parent support for the year from the parents. under the rules for children of divorced or separated parents, see Applying this special test to divorced or separated parents. 3. The child is in the custody of one or both parents for more than half of the year. IF more than one person files a return claiming THEN the child will be treated as 4. A decree of divorce or separate mainte- the same qualifying child and . . . the qualifying child of the. . . nance or written separation agreement that only one of the persons is the child’s parent, parent. applies to 2005 provides that the noncus- todial parent can claim the child as a de- parent with whom the child lived pendent (and, in the case of a pre-1985 two of the persons are parents of the child and they for the longer period of time agreement, the noncustodial parent pro- do not file a joint return together, during the year. vides at least $600 for the support of the child during the year) or the custodial par- two of the persons are parents of the child, they do ent signs a written declaration that he or not file a joint return together, and the child lived parent with the highest adjusted she will not claim the child as a dependent with each parent the same amount of time during gross income (AGI). for the year. the year, none of the persons are the child’s parent, person with the highest AGI. Written declaration. The custodial parent may use either Form 8332 or a similar statement Page 12 Jade. This means she can claim Jade as a your husband will be allowed to treat your son as parents described earlier, the noncustodial par- dependent and can claim her as a qualifying a qualifying child. This is because, during 2005, ent can claim an exemption and the child tax child for the child tax credit, head of household the boy lived with him longer than with you. If credit for the child but cannot claim the child as a filing status, credit for child and dependent care you claimed an exemption, the child tax credit, qualifying child for head of household filing sta- expenses, and the earned income credit, if she head of household filing status, credit for child tus, the credit for child and dependent care ex- qualifies for each of those tax benefits. and dependent care expenses, or the earned penses, or the earned income credit. If the child income credit for your son, the IRS will disallow is the qualifying child of more than one other Example 2—two persons unable to agree. your claim to all these tax benefits. In addition, person, only one of those persons can claim the The facts are the same as in Example 1 except because you and your husband did not live apart child as a qualifying child for head of household that you and your mother are unable to agree the last 6 months of the year, your husband filing status, the credit for child and dependent and both of you claim Jade as a dependent and cannot claim head of household filing status. As care expenses, and the earned income credit. claim her as a qualifying child for the child tax a result, his filing status is married filing sepa- No other person can claim any of these three tax credit and earned income credit. You as the rately, so he cannot claim the earned income benefits unless he or she has a different qualify- child’s parent will be the only one allowed to credit or the credit for child and dependent care ing child. If you and any other person file a return claim Jade as a dependent and claim her as a expenses. claiming the child as a qualifying child for any of qualifying child for the child tax credit and these three tax benefits, the IRS will disallow all earned income credit. The IRS will disallow your Example 7 — unmarried parents. You, but one of the claims using the tie-breaker rule in mother’s claim to these tax benefits unless she your 5-year-old son, and your son’s father lived Table 6. has another qualifying child. together all year. You and your son’s father are not married. Your son is a qualifying child of both Qualifying Relative Example 3—qualifying children split be- you and his father because he meets the rela- tween two persons. The facts are the same tionship, age, residency, and support tests for There are four tests that must be met for a as in Example 1 except that you also have two both you and his father. Your adjusted gross person to be your qualifying relative. The four other young children who are qualifying children income (AGI) is $8,000 and your son’s father’s tests are: of both you and your mother. Only one of you AGI is $18,000. Your son’s father agrees to let can claim each child as a dependent. However, 1. Not a qualifying child test, you treat the child as a qualifying child. This you and your mother can split the three qualify- means you can claim him as a dependent and 2. Member of household or relationship test, ing children between you. For example, you can treat him as a qualifying child for the child tax claim one child as a dependent and your mother 3. Gross income test, and credit, head of household filing status, credit for can claim the other two. child and dependent care expenses, and the 4. Support test. earned income credit, if you qualify for each of Example 4—taxpayer who is a qualifying those tax benefits. child. The facts are the same as in Example 1 Age. Unlike a qualifying child, a qualifying rel- except that you are only 18 years old and did not Example 8 — unmarried parents. The ative can be any age. There is no age test for a provide more than half of your own support for facts are the same as in Example 7 except that qualifying relative. the year. This means you are your mother’s you and your son’s father are unable to agree qualifying child and she could claim you as a and both of you claim your son as a qualifying Kidnapped child. You can treat a child as dependent. Because of the Dependent Tax- child. Only your son’s father will be allowed to your qualifying relative even if the child has been payer Test explained earlier, you cannot treat treat your son as a qualifying child. This is be- kidnapped, but both of the following statements your daughter as a qualifying child and cannot cause his AGI, $18,000, is more than your AGI, must be true. claim her as a dependent. Only your mother can $8,000. If you claimed an exemption, the child treat your daughter as a qualifying child. tax credit, head of household filing status, credit 1. The child is presumed by law enforcement for child and dependent care expenses, or the authorities to have been kidnapped by Example 5 — separated parents. You, earned income credit for your son, the IRS will someone who is not a member of your your husband, and your 10-year-old son lived disallow your claim to all these tax benefits. family or the child’s family. together until August 1, 2005, when your hus- band moved out of the household. In August and 2. In the year the kidnapping occurred, the Example 9—child did not live with a par- September, your son lived with you. For the rest child met the tests to be your qualifying ent. You and your 7-year-old niece, your of the year, your son lived with your husband. relative for the part of the year before the sister’s child, lived with your mother all year. You Your son is a qualifying child of both you and date of the kidnapping. are 25 years old, and your AGI is $9,300. Your your husband because your son lived with each mother’s AGI is $15,000. Your niece is a qualify- This treatment applies for all years until the of you for more than half the year and because ing child of both you and your mother because child is returned. However, the last year this he met the relationship, age, and support tests she meets the relationship, age, residency, and treatment can apply is the earlier of: for both of you. You and your husband are not support tests for both you and your mother. divorced, legally separated, or separated under However, only one of you can treat her as a 1. The year there is a determination that the a written separation agreement, so the special qualifying child. Your mother agrees to let you child is dead, or rule for divorced or separated parents does not treat the child as a qualifying child. apply. 2. The year the child would have reached age 18. You and your husband will file separate re- Example 10—child did not live with a par- turns. Your husband agrees to let you treat your ent. The facts are the same as in Example 9 son as a qualifying child. This means, if your except that you and your mother are unable to husband does not claim your son as a qualifying agree and both of you claim your niece as a Not a Qualifying Child Test child, you can claim your son as a dependent qualifying child. Only your mother will be allowed and treat him as a qualifying child for the child A child is not your qualifying relative if the child is to treat your niece as a qualifying child. This is tax credit. However, you cannot claim head of your qualifying child or the qualifying child of because your mother’s AGI, $15,000, is more household filing status because you and your anyone else. than your AGI, $9,300. If you claimed an exemp- husband did not live apart the last six months of tion, the child tax credit, head of household filing Example 1. Your 22-year-old daughter, who the year. As a result, your filing status is married status, credit for child and dependent care ex- is a student, lives with you and meets all the filing separately, so you cannot claim the earned penses, or the earned income credit for your tests to be your qualifying child. She is not your income credit or the credit for child and depen- niece, the IRS will disallow your claim to all qualifying relative. dent care expenses. these tax benefits. Example 2. Your 2-year-old son lives with Applying this special test to divorced or sep- Example 6—separated parents. The facts your parents and meets all the tests to be their arated parents. If a child is treated as the are the same as in Example 5 except that you qualifying child. He is not your qualifying rela- qualifying child of the noncustodial parent under and your husband are unable to agree and both tive. the rules for children of divorced or separated of you claim your son as a qualifying child. Only Page 13 Example 3. Your son lives with you but is hold during periods of time when one of you, or Gross income includes a partner’s share of not your qualifying child because he is 30 years both, are temporarily absent due to special cir- the gross (not a share of the net) partnership old and does not meet the age test. He may be cumstances such as: income. your qualifying relative if the gross income test Gross income also includes all unemploy- • Illness, and the support test are met. ment compensation and certain scholarship and fellowship grants. Scholarships received by de- • Education, Example 4. Your 13-year-old grandson gree candidates that are used for tuition, fees, • Business, lived with his mother for 3 months, with his uncle supplies, books, and equipment required for for 4 months, and with you for 5 months during particular courses may not be included in gross • Vacation, or the year. He is not your qualifying child because income. For more information about scholar- • Military service. he does not meet the residency test. He may be ships, see chapter 1 of Publication 970, Tax your qualifying relative if the gross income test Benefits for Education. If the person is placed in a nursing home for and the support test are met. Tax-exempt income, such as certain social an indefinite period of time to receive constant security benefits, is not included in gross in- medical care, the absence may be considered come. temporary. Member of Household or Disabled dependent working at sheltered Relationship Test workshop. For purposes of this test (the gross Death or birth. A person who died during the income test), the gross income of an individual year, but lived with you as a member of your To meet this test, a person must either: who is permanently and totally disabled at any household until death, will meet this test. The 1. Live with you all year as a member of your time during the year does not include income for same is true for a child who was born during the household, or services the individual performs at a sheltered year and lived with you as a member of your workshop. The availability of medical care at the household for the rest of the year. The test is 2. Be related to you in one of the ways listed workshop must be the main reason for the also met if a child lived with you as a member of under Relatives who do not have to live individual’s presence there. Also, the income your household except for any required hospital with you. must come solely from activities at the workshop stay following birth. If at any time during the year the person was that are incident to this medical care. If your dependent died during the year and your spouse, that person cannot be your qualify- A “sheltered workshop” is a school that: you otherwise qualified to claim an exemption ing relative. However, see Personal Exemp- for the dependent, you can still claim the exemp- • Provides special instruction or training de- tions, earlier. tion. signed to alleviate the disability of the indi- vidual, and Relatives who do not have to live with you. Example. Your dependent mother died on A person related to you in any of the following • Is operated by certain tax-exempt organi- January 15. She met the tests to be your qualify- ways does not have to live with you all year as a zations or by a state, a U.S. possession, a ing relative. The other tests to claim an exemp- member of your household to meet this test. political subdivision of a state or posses- tion for a dependent were also met. You can sion, the United States, or the District of • Your child, stepchild, eligible foster child, claim an exemption for her on your return. Columbia. or a descendant of any of them (for exam- ple, your grandchild). (A legally adopted Local law violated. A person does not meet child is considered your child.) this test if at any time during the year the rela- Support Test (To Be a Qualifying tionship between you and that person violates Relative) • Your brother, sister, half brother, half sis- local law. ter, stepbrother, or stepsister. To meet this test, you generally must provide Example. Your girlfriend lived with you as a • Your father, mother, grandparent, or other more than half of a person’s total support during member of your household all year. However, direct ancestor, but not foster parent. the calendar year. your relationship with her violated the laws of the However, if two or more persons provide • Your stepfather or stepmother. state where you live, because she was married support, but no one person provides more than to someone else. Therefore, she does not meet • A son or daughter of your brother or sister. half of a person’s total support, see Multiple this test and you cannot claim her as a depen- Support Agreement, later. • A brother or sister of your father or dent. mother. How to determine if support test is met. Adopted child. An adopted child is always You figure whether you have provided more • Your son-in-law, daughter-in-law, treated as your own child. The term “adopted than half of a person’s total support by compar- father-in-law, mother-in-law, child” includes a child who was lawfully placed ing the amount you contributed to that person’s brother-in-law, or sister-in-law. with you for legal adoption. support with the entire amount of support that Any of these relationships that were established person received from all sources. This includes by marriage are not ended by death or divorce. Cousin. Your cousin meets this test only if he support the person provided from his or her own or she lives with you all year as a member of Eligible foster child. An eligible foster child funds. your household. A cousin is a descendant of a is an individual who is placed with you by an You may find Worksheet 1 helpful in figuring brother or sister of your father or mother. authorized placement agency or by judgment, whether you provided more than half of a decree, or other order of any court of competent person’s support. jurisdiction. Person’s own funds not used for support. Gross Income Test Joint return. If you file a joint return, the per- A person’s own funds are not support unless To meet this test, a person’s gross income for son can be related to either you or your spouse. they are actually spent for support. the year must be less than $3,200. Also, the person does not need to be related to Example. Your mother received $2,400 in the spouse who provides support. Gross income defined. Gross income is all social security benefits and $300 in interest. She For example, your spouse’s uncle who re- income in the form of money, property, and paid $2,000 for lodging and $400 for recreation. ceives more than half of his support from you services that is not exempt from tax. She put $300 in a savings account. may be your qualifying relative, even though he In a manufacturing, merchandising, or min- Even though your mother received a total of does not live with you. However, if you and your ing business, gross income is the total net sales $2,700, she spent only $2,400 for her own sup- spouse file separate returns, your spouse’s un- minus the cost of goods sold, plus any miscella- port. If you spent more than $2,400 for her sup- cle can be your qualifying relative only if he lives neous income from the business. port and no other support was received, you with you all year as a member of your house- Gross receipts from rental property are gross have provided more than half of her support. hold. income. Do not deduct taxes, repairs, etc., to Temporary absences. A person is consid- determine the gross income from rental prop- Child’s wages used for own support. You ered to live with you as a member of your house- erty. cannot include in your contribution to your Page 14 child’s support any support that is paid for by the for that person’s support if it is shown that part of rooming facilities. Figure Grace’s total support child with the child’s own wages, even if you paid the payments were not used for that purpose. as follows: the wages. Foster care payments and expenses. Pay- Fair rental value of lodging . . . . . . $ 1,800 Year support is provided. The year you pro- ments you receive for the support of a foster vide the support is the year you pay for it, even if child from a child placement agency are consid- Clothing, transportation and you do so with borrowed money that you repay ered support provided by the agency. Similarly, recreation . . . . . . . . . . . . . . . . . . 2,400 in a later year. payments you receive for the support of a foster Medical expenses . . . . . . . . . . . . 1,200 If you use a fiscal year to report your income, child from a state or county are considered sup- you must provide more than half of the Share of food (1/5 of $5,200) . . . . . 1,040 port provided by the state or county. dependent’s support for the calendar year in If you are not in the trade or business of Total support . . . . . . . . . . . . . . . $6,440 which your fiscal year begins. providing foster care and your unreimbursed out-of-pocket expenses in caring for a foster Armed Forces dependency allotments. The The support Frank and Mary provide ($1,800 child were mainly to benefit an organization part of the allotment contributed by the govern- lodging + $1,200 medical expenses + $1,040 qualified to receive deductible charitable contri- ment and the part taken out of your military pay food = $4,040) is more than half of Grace’s butions, the expenses are deductible as charita- are both considered provided by you in figuring $6,440 total support. ble contributions but are not considered support whether you provide more than half of the sup- you provided. For more information about the port. If your allotment is used to support persons Example 2. Your parents live with you, your deduction for charitable contributions, see Publi- other than those you name, you can take the spouse, and your two children in a house you cation 526. If your unreimbursed expenses are exemptions for them if they otherwise qualify. own. The fair rental value of your parents’ share not deductible as charitable contributions, they of the lodging is $2,000 a year ($1,000 each), are considered support you provided. Example. You are in the Armed Forces. which includes furnishings and utilities. Your fa- If you are in the trade or business of provid- You authorize an allotment for your widowed ther receives a nontaxable pension of $4,200, ing foster care, your unreimbursed expenses mother that she uses to support herself and her which he spends equally between your mother are not considered support provided by you. sister. If the allotment provides more than half of and himself for items of support such as cloth- each person’s support, you can take an exemp- ing, transportation, and recreation. Your total Example. Lauren, an eligible foster child, tion for each of them, if they otherwise qualify, food expense for the household is $6,000. Your lived with Mr. and Mrs. Smith for the last 3 even though you authorize the allotment only for heat and utility bills amount to $1,200. Your months of the year. The Smiths cared for Lauren your mother. mother has hospital and medical expenses of because they wanted to adopt her (although she Tax-exempt military quarters allowances. $600, which you pay during the year. Figure had not been placed with them for adoption). These allowances are treated the same way as your parents’ total support as follows: They did not care for her as a trade or business dependency allotments in figuring support. The or to benefit the agency that placed her in their allotment of pay and the tax-exempt basic allow- home. The Smiths’ unreimbursed expenses are Support provided Father Mother ance for quarters are both considered as pro- not deductible as charitable contributions but Fair rental value of lodging $1,000 $1,000 vided by you for support. are considered support they provided for Lauren. Pension spent for their Tax-exempt income. In figuring a person’s support . . . . . . . . . . . . . 2,100 2,100 total support, include tax-exempt income, sav- Home for the aged. If you make a lump-sum ings, and borrowed amounts used to support Share of food (1/6 of advance payment to a home for the aged to take that person. Tax-exempt income includes cer- $6,000) . . . . . . . . . . . . . 1,000 1,000 care of your relative for life and the payment is tain social security benefits, welfare benefits, based on that person’s life expectancy, the Medical expenses for nontaxable life insurance proceeds, Armed amount of support you provide each year is the mother . . . . . . . . . . . . . . 600 Forces family allotments, nontaxable pensions, lump-sum payment divided by the relative’s life Parents’ total support . . . $4,100 $4,700 and tax-exempt interest. expectancy. The amount of support you provide also includes any other amounts you provided You must apply the support test separately Example 1. You provide $4,000 toward during the year. to each parent. You provide $2,000 ($1,000 your mother’s support during the year. She has lodging, $1,000 food) of your father’s total sup- earned income of $600, nontaxable social se- port of $4,100 — less than half. You provide curity benefits of $4,800, and tax-exempt inter- Total Support $2,600 to your mother ($1,000 lodging, $1,000 est of $200. She uses all these for her support. food, $600 medical) — more than half of her To figure if you provided more than half of a You cannot claim an exemption for your mother total support of $4,700. You meet the support person’s support, you must first determine the because the $4,000 you provide is not more test for your mother, but not your father. Heat total support provided for that person. Total sup- than half of her total support of $9,600. and utility costs are included in the fair rental port includes amounts spent to provide food, value of the lodging, so these are not considered lodging, clothing, education, medical and dental Example 2. Your brother’s daughter takes separately. care, recreation, transportation, and similar ne- out a student loan of $2,500 and uses it to pay cessities. her college tuition. She is personally responsible Lodging. If you provide a person with lodging, Generally, the amount of an item of support for the loan. You provide $2,000 toward her total you are considered to provide support equal to is the amount of the expense incurred in provid- support. You cannot claim an exemption for her the fair rental value of the room, apartment, ing that item. For lodging, the amount of support because you provide less than half of her sup- house, or other shelter in which the person lives. is the fair rental value of the lodging. port. Fair rental value includes a reasonable allow- Expenses that are not directly related to any ance for the use of furniture and appliances, and Social security benefits. If a husband and one member of a household, such as the cost of for heat and other utilities that are provided. wife each receive benefits that are paid by one food for the household, must be divided among check made out to both of them, half of the total Fair rental value defined. This is the the members of the household. paid is considered to be for the support of each amount you could reasonably expect to receive spouse, unless they can show otherwise. from a stranger for the same kind of lodging. It is Example 1. Grace Brown, mother of Mary If a child receives social security benefits and used instead of actual expenses such as taxes, Miller, lives with Frank and Mary Miller and their uses them toward his or her own support, the interest, depreciation, paint, insurance, utilities, two children. Grace gets social security benefits benefits are considered as provided by the child. cost of furniture and appliances, etc. In some of $2,400, which she spends for clothing, trans- cases, fair rental value may be equal to the rent Support provided by the state (welfare, portation, and recreation. Grace has no other paid. food stamps, housing, etc.). Benefits pro- income. Frank and Mary’s total food expense for vided by the state to a needy person generally the household is $5,200. They pay Grace’s If you provide the total lodging, the amount of are considered support provided by the state. medical and drug expenses of $1,200. The fair support you provide is the fair rental value of the However, payments based on the needs of the rental value of the lodging provided for Grace is room the person uses, or a share of the fair recipient will not be considered as used entirely $1,800 a year, based on the cost of similar rental value of the entire dwelling if the person Page 15