Are You Entitled to Claim a Dependence Exemption?
If you support someone – for instance, a child or an elderly relative – you may be entitled to claim a dependency exemption for that person on your federal tax return. The exemption, which is indexed annually, is $3,950 for 2014. However, this tax benefit is far from automatic.
For starters, you can claim a dependency exemption only for a “qualified child” or “qualifying relative.” Generally, a qualifying child is a child under age 19, or a full-time student under age 24, who lives with you more than half of the year and doesn’t provide more than half of his or her own annual support. A qualifying relative is someone related to you who is not a qualifying child, earns no more than the personal exemption amount in gross income and for whom you provide more than half of his or her annual support.
Rules for Claiming a Dependency Exemption
It sounds easy enough, but there are numerous special rules. For instance, if you pitch in with other relatives to support a qualifying relative through a “multiple support agreement,” one supporter can claim the dependency exemption for this year. Note that it may be difficult to qualify for the exemption due to the “gross income limit,” but at least social security benefits don’t count toward this test. In other situations, a divorced or separated couple may arrange for one spouse to claim the dependency exemption for a qualifying child. Another rule: You can’t claim an exemption for someone who files a joint return. Finally, dependency exemptions, along with other personal exemptions, are phased out for upper-income taxpayers. For 2014, the phase-out begins at $305,050 of modified adjusted gross income (MAGI) for joint filers and $254,200 of MAGI for single filers. Contact us if you would like more details.