Although the deduction for personal and dependency exemptions is temporarily repealed for tax years 2018 through 2025, the definition of a dependent is still applicable for the child tax credit and other tax benefits. A dependent is either a qualifying child or a qualifying relative of the taxpayer. Sometimes a child meets the rules to be a qualifying child of more than one person. However, only one person can claim the child as a qualifying child for all of the following tax benefits:
- Earned income tax credit
- Child tax credit
- Head of household filing status
- Credit for the child and dependent care expenses
- Exclusion for dependent care benefits
Another person(s) cannot take any of the six tax benefits listed above unless he or she has a different qualifying child. If they cannot agree who will claim the child as a qualifying child, and more than one person actually claims tax benefits using the same child, the IRS will use the tie-breaker rules.
- The parents if they file a joint return;
- The parent, if only one of the persons is the child’s parent;
- The parent with whom the child lived the longest during the tax year, if two of the persons are the child’s parent and they do not file a joint return together.
- The parent with the highest AGI if the child lived with each parent for the same amount of time during the tax year, and they do not file a joint return together;
- The person with the highest AGI if no parent can claim the child as a qualifying child; or
- A person with the higher AGI than any parent who can also claim the child as a qualifying child but does not.
Applying the tiebreaker rules to divorced or separated parents (or parents who live apart). If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim the child tax credit for the child. However, only the custodial parent can claim the credit for child and dependent care expenses or the exclusion for dependent care benefits for the child, and only the custodial parent can treat the child as a dependent for the health coverage tax credit.
Also, the noncustodial parent can’t claim the child as a qualifying child for head of household filing status or the earned income credit. Instead, the custodial parent, if eligible, or another eligible person can claim the child as a qualifying child for those two benefits. If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine whether the custodial parent or another eligible person can treat the child as a qualifying child.
Earned Income Tax Credit
If another person uses a taxpayer’s qualifying child to claim the earned income tax credit (EITC) under the tie breaker rules, the taxpayer may claim the EITC only if they have another qualifying child. The taxpayer cannot take the credit using the rules for those with no qualifying child.
There are multiple tax benefits to claiming a qualifying child. However, if your child is possibly a qualifying child for anyone else, please call our office to discuss your situation. It is important to understand your options and the impact on your filing status and potential tax liability.