Question: To qualify for head of household filing status, do I have to claim my child as a dependent?
Answer: Generally, to qualify for head of household, you must have a qualifying child or dependent. However, a custodial parent may be able to claim head of household filing status with a qualifying child even if he or she released a claim to exemption for the child.
Question: Are child support payments deductible by the payer or can the payer claim a dependency exemption for the child?
Answer: No, child support payments are neither deductible by the payer nor taxable income to the recipient. However, the payer of child support may be able to claim the child as a dependent:
The child is the qualifying child of the custodial parent, and the custodial parent is generally allowed to claim a dependency exemption for the child, if the other tests for claiming the exemption are met. The parent with whom the child lived for the greater part of the year is the custodial parent for income tax purposes.
The noncustodial parent may claim an exemption for the child if the special rule for a child of divorced or separated parents (or parents who live apart) applies. This requires in part, that the custodial parent sign a Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, or a substantially similar statement. The noncustodial parent must attach it to his or her return.
Question: My father is in a nursing home and I pay for the entire cost. Can I deduct these expenses on my tax return?
Answer: Yes, in certain instances nursing home expenses are allowable as medical expenses.
If you or someone who was your spouse or your dependent, either when the service was provided or when you paid them, is in a nursing home primarily for medical care, then the entire cost including meals and lodging is deductible as a medical expense.
If the individual is in the home mainly for personal reasons, then only the cost of the actual medical care is deductible as a medical expense, not the cost of the meals and lodging.
Question: My university required each incoming freshman to come to school with their own computer. Is there any way to deduct the cost of the computer from my tax liability?
Answer: The cost of a personal computer is generally a personal expense that's not deductible. However, you may be able to claim an American opportunity tax credit if you're required to have a computer to enroll or attend your university.
Question: How do I know if I have to file quarterly individual estimated tax payments?
Answer: You must make estimated tax payments for the current tax year if both of the following apply:
You expect to owe at least $1,000 in tax for the current tax year after subtracting your withholding and refundable credits.
You expect your withholding and refundable credits to be less than the smaller of:
90% of the tax to be shown on your current year’s tax return, or
100% of the tax shown on your prior year’s tax return. (Your prior year tax return must cover all 12 months.)
Question: How much income can an unmarried dependent student make before he or she must file an income tax return?
Single Dependents
You must file a return if any of the following apply. 1. Your unearned income was more than $1,050. 2. Your earned income was more than $6,300. 3. Your gross income was more than the larger of— a. $1,050, or b. Your earned income (up to $5,950) plus $350
Even if you don't have to file a federal income tax return, you should file if you can get money back (for example, you had federal income tax withheld from your pay or you qualify for a refundable tax credit). See Who Should File in Publication 501, for more examples.
Question: Is there an age limit on claiming my child as a dependent?
Answer: To claim your child as your dependent, your child must meet either the qualifying child test or the qualifying relative test:
To meet the qualifying child test, your child must be younger than you and either younger than 19 years old or be a "student" younger than 24 years old as of the end of the calendar year.
There's no age limit if your child is "permanently and totally disabled" or meets the qualifying relative test.
Question: Who Can You Claim as a Dependent?
Rules for All Dependents
Dependents are usually, but not always, a child or other relative. Qualifying children and qualifying relatives have their own additional requirements, but all dependents must meet these requirements:
Dependents can have their own tax returns, and even be married, but they must not have filed a joint tax return for the year unless it’s just to claim a refund.
They must be a U.S. citizen, U.S. national, or a resident alien.
They must have a taxpayer identification number. That’s usually a Social Security Number, but if the child doesn’t qualify for one, it can be an Individual Taxpayer Identification Number (ITIN) or an Adoption Taxpayer Identification Number (ATIN).
Rules for Claiming Children
When you’re claiming a dependent who is a child, there are further requirements:
The child has to have lived with you for at least half of the year.
The child has to be related to you as a son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of those.
The child must be 18 or younger at the end of the year, or under 24 if a student. To be a student, the child must have attended school full-time during at least five months of the year. The five months don’t have to be in a row.
The child must be younger than you (or your spouse, if married filing jointly), unless the child is disabled.
Rules for Claiming Other Relatives and Unrelated Persons
For a parent or other relative, there are different additional requirements:
The person cannot have a gross yearly income over $4,050. (That’s the amount for 2016 returns — it usually changes each year.)
The person can’t be a qualifying child dependent of you or another person. That means you can’t claim the person if someone else could.
The person must be either related to you or must have lived with you all year as a member of your household.
Question: How do you qualify for the child tax credit?
Answer: Child Tax Credit can reduce your tax bill by as much as $1,000 per child, if you meet all seven requirements:
Age Test
To qualify, a child must have been under age 17 (i.e., 16 years old or younger) at the end of the tax year for which you claim the credit.
Relationship Test
The child must be your own child, a stepchild, or a foster child placed with you by a court or authorized agency. An adopted child is always treated as your own child. "An adopted child" includes a child lawfully placed with you for legal adoption, even if that adoption is not final by the end of the tax year. You can also claim your brother or sister, stepbrother, stepsister. And you can claim descendants of any of these qualifying people — such as your nieces, nephews and grandchildren — if they meet all the other tests.
Support Test
To qualify, the child cannot have provided more than half of his or her own financial support during the tax year.
Dependent Test
You must claim the child as a dependent on your tax return.
Bear in mind that in order for you to claim a child as a dependent, he or she must: 1) be your child (or adoptive or foster child), sibling, niece, nephew or grandchild; 2) be under age 19, or under age 24 and a fulltime student for at least five months of the year; or be permanently disabled, regardless of age; 3) have lived with you for more than half the year; and 4) have provided no more than half his or her own support for the year.
Citizenship Test
The child must be a U.S. citizen, a U.S. national or a U.S. resident alien. (For tax purposes, the term "U.S. national" refers to individuals who were born in American Samoa or in the Commonwealth of the Northern Mariana Islands.)
Residence Test
The child must have lived with you for more than half of the tax year for which you claim the credit. There are important exceptions, however: A child who was born (or died) during the tax year is considered to have lived with you for the entire year.
Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military services or detention in a juvenile facility, are counted as time the child lived with you. (There are also some exceptions to the residency test for children of divorced or separated parents.
Family Income Test
The child tax credit is reduced if your modified adjusted gross income (MAGI) is above certain amounts, which are determined by your tax-filing status. The phase out threshold is $55,000 for married couples filing separately; $75,000 for single, head of household, and qualifying widow or widower filers; and $110,000 for married couples filing jointly. For each $1,000 of income above the threshold, your available child tax credit is reduced by $50.
What if the credit exceeds my tax liability?
The Child Tax Credit is nonrefundable; if your credit exceeds your tax liability, your tax bill is reduced to zero and any remaining unused credit is lost. However, you may be able to claim a refundable Additional Child Tax Credit for the unused balance. You can find out if you're eligible for this refundable credit by completing the worksheet in IRS Form 8812.
Question: Is daycare tax deductible?
Answer: If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.
Question: Can I receive a tax refund if I owe for a prior year's federal taxes since I am currently making payments under an installment agreement or payment plan?
Answer: No, one of the conditions of your installment agreement is that any refund due to you, the IRS will automatically apply against taxes you owe. Because your refund isn't applied toward your regular monthly payment, continue making your installment agreement payments as scheduled until you pay your liability, including accrued penalties and interest, in full.
If your refund exceeds your total balance due on all outstanding liabilities including accruals, and you don't owe certain past-due amounts, such as federal tax, state tax, a student loan, or child support, you'll receive a refund of the amount over and above what you owe. For more information on these non-IRS refund offsets, you can call the Bureau of the Fiscal Service (BFS) at 800-304-3107 (toll-free).
Question: My mother transferred to me the title of her home. Do I need to report this transaction to the IRS?
Answer: No, but your mother may be required to report this transaction to the IRS as a taxable gift to you. Generally, a taxable gift is any property transferred for less than adequate and full consideration.
Generally, an individual must file a gift tax return (Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return) for the year of the gift, if any of the following apply:
The individual gave gifts to at least one person (other than his or her spouse) that are more than the annual exclusion amount for the year. The annual exclusion amount for 2017 and 2016 is $14,000.
The individual and his or her spouse are splitting a gift.
The individual gave someone (other than his or her spouse) a gift of a future interest that the donee cannot actually possess, enjoy, or receive income from until some time in the future.
The individual gave his or her spouse an interest in property that will end by some future event.
Question: I received an academic scholarship that is designated for tuition and books. Is this taxable income?
Answer: The scholarship isn't taxable income if you satisfy all of the following conditions:
You're a candidate for a degree at an educational institution described in section 170(b)(1)(A)(ii) of the Internal Revenue Code.
You use it to pay for: (1) tuition and fees required for enrollment or attendance at the eligible educational institution, and (2) fees, books, supplies, and equipment required of all students for the courses of instruction at the eligible educational institution.
The amount received doesn't represent payment for your services (unless the amount you receive is for services required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program).