Dependent vs. Exemption?

Question

So, I asked a question about this earlier and got great answers BUT I'm confused about what a dependent is compared to an expemtion or qualifying child...aren't they the same thing? I am going to let my mother claim my daughter as her dependent so she could claim head of household (we live with my mom)but i am considering using my daughter for my EIC and Child tax credit....is that allowed? OR letting my mom use her child tax credit because I myself get a EIC correct without children right? Also, i've tried and tried to put my mom as head of household without my daughter as her dependent and it just doesn't let me (on turbotax) because it says you have to have a dependent.

Answer 1

Dependent, exemption and qualifying child are related terms, but each means something a little different.

A dependent is a person, an exemption is an amount of money you get to subtract from your income before calculating your taxes BECAUSE of that person, or because of yourself - you aren't your own dependent, but you get an exemption for yourself assuming that your mom can't claim YOU as her dependent also.

A qualifying child is a particular kind of dependent - there are other dependents who don't qualify you for some benefits.

If your mom takes your daughter as a dependent, then SHE gets the child tax credit, you don't. And you would not be able to claim your daughter for you to get EIC. If your income is low enough (under $12,120), you could get something for EIC anyway, but it wouldn't be as much as if you were claiming your daughter as a dependent.

Answer 2

Hi there. Don't feel alone in this, because there are thousands of people in your exact situation. The rules for splitting tax benefits for children have changed, and are much more complex than they used to be.

Let's get a few definitions of terms in, first, and we'll go from there. A personal exemption is a dollar amount that reduces the adjusted gross income of the taxpayer. Every person who appears on a tax return entitles the taxpayer listed on that return to take 1 personal exemption off of their income for that person.

A dependent is either a qualifying child or qualifying relative of the taxpayer. There are four tests which a person must meet in order to be classified as a dependent of someone. These tests are relationship, citizenship, the joint return test, and they cannot claim a dependent of their own.

The relationship test says that a person is a qualifying child if they are the taxpayer's son, daughter, stepchild, adopted child, eliegible foster child, or a descendant thereof; or the taxpayer's brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant thereof. Notice that a cousin isn't in this list.

A dependent must not have filed a joint tax return with anyone else unless they are married and are only filing to receive a refund, weren't required to file a tax return, and would have no tax liability for either spouse if they were to file separately.

For a qualifying child, there are four tests or rules that must be met: age, relationship, residency, and support.

To be considered a qualifying child, the child must not have provided more than half of his or her own support for the year. Support includes any wages, Social Security benefits received in the child's name, parental support, and governmental support such as food stamps and welfare payments.

The child must live with the taxpayer more than half of the year to satisfy the residency test. And, to satisfy the age test, the child must be either under age 19 at the end of the tax year, or under 24 if a full-time student, or any age if permanently disabled.

Now as to filing status of head of household. A person cannot file as head of a houshold unless they are single or are able to be classified as single by IRS rules, paid more than half of the cost of maintaining a home, and they must have a qualifying child who is a dependent and who resided in the household for more than half of the year.

There are a few situations where the Child Tax Credit may be claimed on a child that is not a dependent of the taxpayer.

This can only be done if the taxpayer can be claimed as a dependent on someone else's return and has a qualifying child of their own, and if the qualifying child is married and files a joint return only to receive a refund as in the rules listed above.

Okay, so ... if you are a dependent on your mother's tax return, you may take only the Child Tax Credit on your return.

Otherwise, it's a no-go. So, because you are filing a tax return and carrying your own personal exemption, which makes you not a dependent of your mother, either your child is a dependent on your return and you receive all of the tax benefits from this, or she is a dependent on your mother's tax return--remembering that whoever provided more than half of the child's support has the right to claim the dependency--and the Child Tax Credit goes to the person who claims the child on the return.

If you want your mother to have $1000, (the amount of the Child Tax Credit for a child under age 17) and your tax refund is at least that much, there's no law saying that you can't give her this much money after you receive it. Much better to file a correct tax return and abide by the IRS laws than to file an incorrect one and then take a chance on being audited and fined for filling a fraudulent tax return.