nephew's son lives with him for past 3 years, nephew claims him as a dependent, son's mother is paying full cost of college now, she wants to claim his dependency since she spends more on him and take various education credits.
Who can claim the son as a dependent?
tks all
bw
If the son is not self-supporting and is a full-time student (attending any part of 5 months in the year) under the age of 24 at year-end, then the parent with whom the son lives for more than six months gets the dependency exemption because the son is a "qualifying child" of that parent. All the other tax benefits of having a qualifying child go to that parent. E.g., the ability to file as head of household if the other criteria for that benefit exists; the ability to claim the earned income tax credit if the parent has earned income and their income does not exceed certain thresholds and higher education tax benefits such as the American Opportunity Credit or Lifetime Learning Credit. For these credits, the parent who can not claim the exemption and is paying the tuition gets NO tax benefit. Those payments are considered to be have made to the son. And as the son is a dependent of the parent with whom he lives, it is that parent who gets to use those expenses to qualify for the credit. If the parent with whom the son lives forgoes claiming the dependency exemption, no one gets to claim that exemption. However, any payments made for qualified higher education expenses can be used by the student to claim the credit on his own return. So.... the parent without the exemption who paid the school, even if under court order, gets no tax benefit whatsoever.
In lieu of taking a credit, there is the option to take a tax deduction. The rules are slightly different. The parent claiming the exemption gets the deduction only if that parent paid the expenses. If the student paid them, then no one gets a deduction. If someone else paid the expenses no one gets the deduction. If the parent forgoes the exemption and paid the expenses, no one gets the deduction. The only other person who can conceivably get the deduction is the student if the student is not a dependent of anyone and that student paid the expenses.
If the custodial parent (the OP's nephew, the child's father) agrees that the child's mother should be allowed to claim the son as a dependent, can't he release the exemption to the mother by giving her a signed Form 8332? Wouldn't she then be able to claim the education credit or deduction, since she is paying the tuition and she would be claiming the child as her dependent?
Bob Sandler
Once a child reaches the age of majority, that child is no longer in custody of any parent and IRC Section 152(e) (the special rule for divorced, separated, etc.) is not applicable.
You can't release the exemption of an emancipated child.
No offense intended, but that's nonsense. The law defines "custodial parent" in terms of "custody", but does not define "custody". The regulations define "custody" in terms of "physical custody", which applies as well to an emancipated child, a child under 24 who is a student, or a (physically) disabled child of any age.
-- Arthur L. Rubin, CRTP, AFSP, in Brea, CA
Yes, he can releasse the dependency but in this situation, nobody is talking and demanding and dependency is very valuable to Dad.
Sorry, but the IRS disagrees with you on that. This issue has nothing to do with whether the child can be a dependent, but rather whether the rules for divorced or separated parents can apply.
Publication 501 explains this with two examples:
"Example 5-child emancipated in May. When your son turned age 18 in May 2011, he became emancipated under the law of the state where he lives. As a result, he is not considered in the custody of his parents for more than half of the year. The special rule for children of divorced or separated parents does not apply.
Example 6-child emancipated in August. Your daughter lives with you from January 1, 2011, until May 31, 2011, and lives with her other parent, your ex-spouse, from June 1, 2011, through the end of the year. She turns 18 and is emancipated under state law on August 1, 2011. Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2011. You are the custodial parent. "
See Boltinghouse v. Commissioner, T.C.M. 2007-324
See my reply regarding an emancipated person. You can't release the exemption once a person becomes emancipated.
Besides a variety of court cases, the emancipation rule is in the treasury regulations. See Title 26 Reg. 1.152-4(d)(1).
"(d) Custodial parent (1) In general. The custodial parent is the parent with whom the child resides for the greater number of nights during the calendar year, and the noncustodial parent is the parent who is not the custodial parent. A child is treated as residing with neither parent if the child is emancipated under state law. For purposes of this section, a child resides with a parent for a night if the child sleeps?
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