21.3 Qualifying Children
You may claim an exemption for your qualifying children provided you (and your spouse if you file jointly) cannot be claimed as a dependent by someone else and the citizenship or resident (21.8) and joint return (21.9) tests applicable to all dependents also are met.
Qualifying children include your children, siblings, and their descendants (see the relationship test below) if a residence test and age or student test are also met. If the relationship, residence, and age/student tests are met, you do not have to show that you provided more than half of the child’s support, as is required for a qualifying relative (21.4). However, a child is not a qualifying child if he or she provides over half of his or her own support. A married child who files a joint return also cannot be your qualifying child, unless the joint return is filed solely to obtain a refund. For a qualifying child, there is no gross income test; he or she may earn any amount and still be claimed as your dependent. Even if a child is not a qualifying child, as where the age/student test or place of abode test is not met, you may still be able to claim an exemption for a child with little or no income as a “qualifying relative” (21.4).
Planning Reminder
Relationship test.
Your children, stepchildren, and their descendants (your grandchildren and great-grandchildren), and your siblings, including step- and half-brothers and -sisters and their descendants (your nieces and nephews), meet the relationship test. A legally adopted child or a child lawfully placed with you for adoption is treated as your child, as is a foster child placed with you by a court order or by an authorized placement agency.
Residence test (abode test).
The qualifying child must have the same principal place of abode as you for more than half the year. You do not have to own the home or pay the maintenance costs, but the child must live with you for over half the year.
Temporary absences disregarded. In applying the residence test, your child is considered to be living with you while either of you is temporarily absent (or you both are) due to special circumstances. This includes temporary absences while away at school or on business, while obtaining medical treatment, taking vacations, or serving in the military.
Kidnapped child. The principal place of abode test is considered met for a child under age 18 who met the test prior to being kidnapped by a non–family member.
Birth or death of child during the year.
You may claim a full exemption for a child born during the year ($3,800 for 2012) if the child lived with you after birth, apart from required hospital stays; the principal place of abode test is considered met for the year. An exemption is allowed for a child born alive even if he or she lived only for a moment. No exemption is allowed for a stillborn child.
The principal place of abode test is considered met for a child who died during the year if the child lived with you while alive.
Age or student test.
Your qualifying child must be under age 19 at the end of the year, a full-time student under age 24 at the end of the year, or permanently and totally disabled, regardless of age.
In addition, a child who is not permanently and totally disabled must be younger than you. If you are married and file jointly, the child must be younger than you or your spouse. For example, you are age 21 and you file jointly with your 25-year-old spouse. Your 23-year-old brother, a non-disabled full-time student, lives with you and your spouse. On your joint return, you can claim your brother as a qualifying child because he is younger than your spouse although older than you.
Qualifying as a full-time student. A full-time student is one who attends school full time during at least five calendar months in the tax year. For example: attendance from February through some part of June—or from February through May and then at least one month from September through December—qualifies. The five months do not have to run consecutively. Attendance at a vocational, trade, or technical school for the five-month period qualifies, but not correspondence schools or on-the-job training courses. Your child who attends school at night is considered a full-time student only if he or she is enrolled for the number of hours or classes that is considered full-time attendance.
Child’s self-support test.
You do not have to contribute over 50% of a qualifying child’s support to claim an exemption. This is required for a qualifying relative (21.4) but not for a qualifying child. However, if a child contributes over half of his or her own support, he or she cannot be claimed as your qualifying child. See 21.5 for a list of items (such as food, lodging and clothing) that count as support.
Tie-breaker rules.
The law provides tie-breaker rules to determine who can treat a child as a qualifying child when the qualifying child tests are met by more than one taxpayer.
If only one of the taxpayers is the parent of the child, the child is treated as the qualifying child of that parent. This situation could arise, for example, where a parent and infant child live with the child’s grandparent for more than half the year. Both the child’s parent and grandparent would meet the principal place of abode test and relationship test with respect to the child, but under the tie-breaker rule, the child is treated as the qualifying child of the parent. However, the parent can choose not to claim the child, and allow the grandparent to claim the exemption, provided the grandparent’s adjusted gross income (AGI) exceeds his or her own AGI. If the parent’s AGI equals or is higher than the grandparent’s AGI, the grandparent cannot claim the exemption; only the parent can.
If the parents file separate returns and both meet the tests for treating the child as a qualifying child, they may be unable to agree on which of them should claim the child. If they each claim the child on a separate return, the IRS will first determine if the noncustodial parent is entitled to the exemption under the special rule for divorced or separated parents (21.7). If the special rule applies, the tie-breaker rules do not apply. If the special rule does not apply and the child is a qualifying child of both parents under the above tests, the tie-breaker rule deems the child to be the qualifying child of the parent with whom the child has resided for the longer period during the year. If the residency period with both parents is the same, the parent with the higher adjusted gross income is entitled to treat the child as a qualifying child.
If no parent meets the tests for claiming the child and more than one non-parent meets the tests, the non-parent with the highest adjusted gross income is entitled to claim the child as a qualifying child.