Unit 3: Dependency Relationships

Question 1

What is the significance of the personal and dependency exemptions through tax year 2025?

Answer 1

They are suspended (reduced to $0) through tax year 2025.

Claiming a dependent can still make taxpayers eligible for other tax benefits such as the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC).

Question 2

What are the primary tests for determining if a taxpayer can claim a dependent?

Answer 2

• Dependent taxpayer test
• Joint return test
• Citizenship or residency test

Question 3

What does the Dependent Taxpayer Test specify?

Answer 3

A person who may be claimed as a dependent by another taxpayer may not claim anyone as a dependent on their own tax return.

Question 4

What is the exception to the Joint Return Test?

Answer 4

It does not apply if the joint return is filed only to claim a refund, and neither spouse would have a tax liability, even if they filed separate returns.

Question 5

What is required under the Citizenship or Residency Test for a dependent?

Answer 5

A dependent must be a citizen or resident of the United States, Canada, or Mexico, with exceptions for foreign-born adopted children.

Question 6

What are the two categories of dependents?

Answer 6

• Qualifying child
• Qualifying relative

Question 7

What are the five tests for a qualifying child?

Answer 7

• Relationship Test
• Age Test
• Residency Test
• Support Test
• Tiebreaker Test

Question 8

What is required under the Relationship Test for a qualifying child?

Answer 8

The child must be related to the taxpayer by blood, marriage, or adoption.

Question 9

Under the Age Test, what are the age requirements for a qualifying child?

Answer 9

A qualifying child must be:

• Under 19 at the end of the tax year, or
• Under 24 and a full-time student, or
• Permanently and totally disabled at any time during the year.

Question 10

What is the Residency Test for a qualifying child?

Answer 10

A qualifying child must live with the taxpayer for more than half the tax year.

Question 11

What does the Support Test for a qualifying child stipulate?

Answer 11

A qualifying child cannot provide more than one-half of their own support.

Question 12

What is the tie-breaker test used for in tax dependency claims?

Answer 12

To determine which taxpayer can claim a qualifying child when more than one person is eligible.

The tie-breaker test applies when more than one taxpayer attempts to claim the same child as a dependent. The IRS uses a sequence of rules to resolve such conflicts.

Question 13

What are the four tests for a qualifying relative?

Answer 13

• Not a qualifying child test
• Member of household or relationship test
• Gross income test
• Support test

Question 14

True or False:

A taxpayer can claim a housekeeper as a dependent if they live with the taxpayer all year.

Answer 14

False

A household employee cannot be claimed as a dependent, regardless of living arrangements.

Question 15

Fill in the blank:

To meet the gross income test for a qualifying relative, the dependent’s gross income must be less than ______ in 2024.

Answer 15

$5,050

Question 16

What must a taxpayer provide to claim an individual as a qualifying relative under the support test?

Answer 16

More than one-half of the dependent’s total support during the year.

Support includes costs for necessities such as food, housing, clothing, healthcare, education, and other similar expenses.

Question 17

Can a cousin be a qualifying child for tax purposes?

Answer 17

No

A cousin cannot be a qualifying child but can be a qualifying relative if they live with the taxpayer for the entire year and meet other tests.

Question 18

Under what condition can a child be claimed as a qualifying relative even if they are a qualifying child for another taxpayer?

Answer 18

When the child’s parent is not required to file an income tax return and either does not file a return or only files to get a refund of income tax withheld or estimated tax paid.

Question 19

True or False:

A person can continue to claim their ex-mother-in-law as a dependent after divorce.

Answer 19

True

Relationships established by marriage do not end due to death or divorce.

Question 20

Under what circumstances can a noncustodial parent claim a child as a dependent?

Answer 20

• The parents are divorced, legally separated, or lived apart during the last six months of the year.
• The child received over half of their support from the parents.
• The child is in the custody of one or both parents.
• The custodial parent signs Form 8332, and the noncustodial parent attaches this to their tax return.

Question 21

True or False:

The custodial parent can revoke the release of a child’s dependency exemption using Form 8332.

Answer 21

True

The revocation can apply starting the year after it was provided to the noncustodial parent. The custodial parent must keep a record of the revocation and evidence of delivery.

Question 22

What is a multiple support agreement?

Answer 22

An arrangement where two or more people jointly provide for a person’s support, but no single individual pays more than half of the support.

Taxpayers use Form 2120, Multiple Support Declaration, to report such an arrangement. The taxpayer claiming the dependent must provide more than 10% of the person’s support.

Question 23

True or False:

A custodial parent can file as head of household even if they do not claim the child as a dependent.

Answer 23

True

This is possible if the custodial parent maintained the home where the child lived for most of the year.

Question 24

What determines the custodial parent if a child lived with each parent for an equal number of nights?

Answer 24

The custodial parent is the one with the higher adjusted gross income.