The IRS released proposed regulations updating the definition of “dependent” for tax purposes. These regulations reflect changes to Code section 152 made by the Working Families Tax Relief Act of 2004.
Code section 152 provides that the term dependent means a taxpayer’s qualifying child or qualifying relative. Specifically,
- Qualifying Child. A qualifying child is an individual who bears a certain relationship to the taxpayer (qualifying child relationship test), has the same principal place of abode as the taxpayer for more than one-half of the taxable year (residency test), is younger than the taxpayer and is under the age of 19 (or age 24 if a full-time student or any age if permanently and totally disabled) (age test), does not provide more than one-half of his or her own support (qualifying child support test) and does not file a joint return with a souse, except to claim a refund of estimated or withheld taxes (joint return test).
- Qualifying Relative. A qualifying relative is an individual who bears a certain relationship to the taxpayer, including an individual who has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household for the taxable year (qualifying relative relationship test), has gross income less than the exemption amount for the taxable year (gross income test), receives more than one-half of his or her support from the taxpayer (qualifying relative support test), and is not a qualifying child of any taxpayer (not a qualifying child test).
The proposed regulations provide guidance on interpreting these terms. They address how to determine gross income when a taxpayer files a joint return and two people can claim a qualifying child. They also address, in examples, how to determine the relationship, residency, and support tests are satisfied. Guidance is given on adoption scenarios and residency rules when there is an absence from the principal place of abode for a period of time during the year.
These new rules will be used in determining dependent status for reimbursement under a dependent day care FSA, tax deductions for children, health coverage for dependents, and other tax purposes.
