Exemption
amount. The amount you can
deduct for each exemption has
increased from $3,050 in 2003 to
$3,100 in 2004.
Exemption
phaseout. You
lose all or part of the benefit
of your exemptions if your
adjusted gross income is above a
certain amount. The amount at
which this phaseout begins
depends on your filing status.
For 2004, the phaseout begins at
$107,025 for married persons
filing separately, $142,700 for
single individuals, $178,350 for
heads of household, and $214,050
for married persons filing
jointly or qualifying widow(er)s.
See
Phaseout of Exemptions, later.
What's New for 2005
Dependency
exemption. Beginning in
2005, you will use new rules to
determine whether you can claim
an exemption for a dependent.
For details, see Publication
553, Highlights of 2004 Tax
Changes.
Introduction
This chapter discusses
exemptions. The following topics
will be explained.
Personal exemptions
— You generally can take
one for yourself and, if
you are married, one for
your spouse.
Exemptions for
dependents — You must
meet five dependency
tests for each exemption
you claim for a
dependent. If you are
entitled to claim an
exemption for a
dependent, that
dependent cannot claim a
personal exemption on
his or her own tax
return.
Phaseout of
exemptions — You get
less of a deduction when
your adjusted gross
income goes above a
certain amount.
Social security
number (SSN) requirement
for dependents — You
must list the social
security number of any
dependent for whom you
claim an exemption.
Deduction.
Exemptions reduce your
taxable income. Generally,
you can deduct $3,100 for
each exemption you claim in
2004. But, you may lose the
benefit of part or all of
your exemption if your
adjusted gross income is
above a certain amount. See
Phaseout of Exemptions,
later.
How you
claim an exemption.
How you claim an exemption
on your tax return depends
on which form you file.
If you file Form 1040EZ,
the exemption amount is
combined with the standard
deduction amount and entered
on line 5.
If you file Form 1040A
or Form 1040, follow the
instructions for the form.
The total number of
exemptions you can claim is
the total in the box on line
6d. Also complete line 26
(Form 1040A) or line 41
(Form 1040) by multiplying
the total number of
exemptions shown in the box
on line 6d by $3,100. If
your adjusted gross income
is more than $107,025, see
Phaseout of Exemptions, later.
Useful Items - You
may want to see:
Publication
501
Exemptions, Standard
Deduction, and Filing
Information
Form
(and Instructions)
2120
Multiple Support
Declaration
8332
Release of Claim to
Exemption for Child of
Divorced or Separated
Parents
Exemptions
There are two types of
exemptions: personal exemptions
and exemptions for dependents.
While each is worth the same
amount ($3,100 for 2004),
different rules apply to each
type.
Personal
Exemptions
You are generally allowed
one exemption for yourself
and, if you are married, one
exemption for your spouse.
These are called personal
exemptions.
Your Own
Exemption
You can take one
exemption for yourself
unless you can be
claimed as a dependent
by another taxpayer.
Single persons.
If another
taxpayer is entitled
to claim you as a
dependent, you
cannot take an
exemption for
yourself. This is
true even if the
other taxpayer does
not actually claim
your exemption.
Married persons.
If you file a
joint return, you
can take your own
exemption. If you
file a separate
return, you can take
your own exemption
only if another
taxpayer is not
entitled to claim
you as a dependent.
Your
Spouse's
Exemption
Your spouse is never
considered your
dependent. You may be
able to take one
exemption for your
spouse only because you
are married.
Joint return.
On a joint return
you can claim one
exemption for
yourself and one for
your spouse.
Separate return.
If you file a
separate return, you
can claim the
exemption for your
spouse only if your
spouse had no gross
income, is not
filing a return, and
was not the
dependent of another
taxpayer. This is
true even if the
other taxpayer does
not actually claim
your spouse's
exemption. This is
also true if your
spouse is a
nonresident alien.
Death of spouse.
If your spouse
died during the
year, you generally
can claim your
spouse's exemption
under the rules just
explained under
Joint return
and
Separate return.
If you remarried
during the year, you
cannot take an
exemption for your
deceased spouse.
If you are a
surviving spouse
without gross income
and you remarry in
the year your spouse
died, you can be
claimed as an
exemption on both
the final separate
return of your
deceased spouse and
the separate return
of your new spouse
for that year. If
you file a joint
return with your new
spouse, you can be
claimed as an
exemption only on
that return.
Divorced or
separated spouse.
If you obtained a
final decree of
divorce or separate
maintenance by the
end of the year, you
cannot take your
former spouse's
exemption. This rule
applies even if you
provided all of your
former spouse's
support.
Exemptions
for Dependents
You are allowed one
exemption for each person
you can claim as a
dependent.
To claim the exemption
for a dependent, you must
meet all five of the
dependency tests, discussed
later. You can claim an
exemption for your dependent
even if your dependent files
a return.
If you are entitled
to claim an exemption for
your dependent, that
dependent cannot claim his
or her own personal
exemption.
Kidnapped child.
You may be eligible to
claim the exemption for
a child even if the
child has been
kidnapped. For more
information, see
Publication 501.
Child
born alive.
If your child was born
alive during the year,
and the dependency tests
are met, you can claim
the exemption. This is
true even if the child
lived only for a moment.
State or local law must
treat the child as
having been born alive.
There must be proof of a
live birth shown by an
official document, such
as a birth certificate.
Stillborn child.
You cannot claim an
exemption for a
stillborn child.
Death
of dependent.
If your dependent died
during the year and
otherwise met the
dependency tests, you
can claim the exemption
for your dependent.
Example.
Your dependent
mother died on
January 15. The five
dependency tests are
met. You can claim
the exemption for
her on your return.
Housekeepers, maids, or
servants.
If these people work
for you, you cannot
claim exemptions for
them.
Child
tax credit.
You may be entitled to
a child tax credit for
each of your qualifying
children for whom you
can claim an exemption.
For more information,
see chapter 36.
Dependency
Tests
The following five tests
must be met for you to claim
an exemption for a
dependent.
Member of
Household or
Relationship Test.
Citizen or
Resident Test.
Joint Return
Test.
Gross Income
Test.
Support Test.
Member of
Household or
Relationship
Test
To meet this test, a
person must either:
Live with you
for the entire year
as a member of your
household, or
Be related to
you in one of the
ways listed later
under
Relatives who do
not have to live
with you.
If at any time during the
year the person was your
spouse, that person cannot
be your dependent. However,
see Personal Exemptions,
earlier.
Temporary absences.
A person lives with
you as a member of your
household even if either
(or both) of you are
temporarily absent due
to special
circumstances. Temporary
absences due to special
circumstances include
absences because of
illness, education,
business, vacation, or
military service.
If the person is
placed in a nursing home
for an indefinite period
of time to receive
constant medical care,
the absence is
considered temporary.
Death
or birth.
A person who died
during the year, but was
a member of your
household until death,
will meet the member of
household test. The same
is true for a child who
was born during the year
and was a member of your
household for the rest
of the year. The test is
also met if a child
would have been a member
except for any required
hospital stay following
birth.
Local
law violated.
A person does not meet
the member of household
test if at any time
during your tax year the
relationship between you
and that person violates
local law.
Relatives who do not
have to live with you.
A person related to
you in any of the
following ways does not
have to live with you
for the entire year as a
member of your household
to meet this test.
Your child,
grandchild,
great
grandchild, etc.
(A legally
adopted child is
considered your
child.)
Your
stepchild.
Your
brother, sister,
half brother,
half sister,
stepbrother, or
stepsister.
Your parent,
grandparent, or
other direct
ancestor, but
not foster
parent.
Your
stepfather or
stepmother.
A brother or
sister of your
father or
mother.
A son or
daughter of your
brother or
sister.
Your
father-in-law,
mother-in-law,
son-in-law,
daughter-in-law,
brother-in-law,
or
sister-in-law.
Any of these
relationships that were
established by marriage
are not ended by death
or divorce.
Adoption.
Even if your adoption
of a child is not yet
final, the child is
considered to be your
child if he or she was
placed with you for
legal adoption by an
authorized placement
agency. The child also
must be a member of your
household, but does not
have to be a member of
your household for the
entire year.
If the child was not
placed with you by an
authorized placement
agency, the child will
meet this test only if
he or she was a member
of your household for
your entire tax year.
Authorized placement
agency. An
authorized placement
agency includes any
person or court
authorized by state law
to place children for
legal adoption.
Foster
child.
A foster child must
live with you as a
member of your household
for the entire year to
qualify as your
dependent. For this
test, a foster child is
one who is in your care
that you care for as
your own child. It does
not matter how the child
became a member of the
household.
Cousin.
You can claim an
exemption for your
cousin only if he or she
lives with you as a
member of your household
for the entire year. A
cousin is a descendant
of a brother or sister
of your father or
mother.
Joint
return.
If you file a joint
return, you do not need
to show that a person is
related to both you and
your spouse. You also do
not need to show that a
person is related to the
spouse who provides
support.
For example, your
spouse's uncle who
receives more than half
his support from you may
be your dependent, even
though he does not live
with you. However, if
you and your spouse file
separate returns, your
spouse's uncle can be
your dependent only if
he is a member of your
household and lives with
you for your entire tax
year.
Citizen or
Resident Test
You cannot claim an
exemption for a dependent
unless that person is a U.S.
citizen or resident, or a
resident of Canada or
Mexico, for some part of the
calendar year in which your
tax year begins. However,
there is an exception for
certain adopted children, as
explained next.
Children's place of
residence.
Children usually are
citizens or residents of
the country of their
parents.
If you were a U.S.
citizen when your child
was born, the child may
be a U.S. citizen
although the other
parent was a nonresident
alien and the child was
born in a foreign
country. If so, and the
other dependency tests
are met, you can take
the exemption. It does
not matter if the child
lives abroad with the
nonresident alien
parent.
Adopted child.
If you are a U.S.
citizen who has legally
adopted a child who is
not a U.S. citizen or
resident, and the other
dependency tests are
met, you can take the
exemption if your home
is the child's main home
and the child is a
member of your household
for your entire tax
year.
Foreign
students' place of
residence.
Foreign students
brought to this country
under a qualified
international education
exchange program and
placed in American homes
for a temporary period
generally are not U.S.
residents and do not
meet the citizen or
resident test. You
cannot claim exemptions
for them. However, if
you provided a home for
a foreign student, you
may be able to take a
charitable contribution
deduction. See
Expenses Paid for
Student Living With You
in chapter
26.
Joint Return
Test
Even if the other
dependency tests are met,
you generally are not
allowed an exemption for
your dependent if he or she
files a joint return.
Example.
You supported your
daughter for the entire
year while her husband
was in the Armed Forces.
The couple files a joint
return. Even though all
the other tests are met,
you cannot take an
exemption for your
daughter.
Exception. The
joint return test does
not apply if a joint
return is filed by the
dependent and his or her
spouse merely as a claim
for refund and no tax
liability would exist
for either spouse on
separate returns.
Example.
Your son and his
wife each had less
than $3,000 of wages
and no unearned
income. Neither is
required to file a
tax return. Taxes
were taken out of
their pay, so they
file a joint return
to get a refund. You
are allowed to take
exemptions for your
son and
daughter-in-law if
the other dependency
tests are met, even
though they file a
joint return.
Gross Income
Test
Generally, you cannot
take an exemption for a
dependent if that person had
gross income of $3,100 or
more for 2004. This test
does not apply if the person
is your child and is either:
Under age 19 at
the end of the year,
or
A student under
age 24 at the end of
the year.
The exceptions for
children under age 19 and
students under age 24 are
discussed in detail later.
If you file on a fiscal
year basis, the gross income
test applies to the calendar
year in which your fiscal
year begins.
Gross
income defined.
All income in the form
of money, property, and
services that is not
exempt from tax is gross
income.
In a manufacturing,
merchandising, or mining
business, gross income
is the total net sales
minus the cost of goods
sold, plus any
miscellaneous income
from the business.
Gross receipts from
rental property are
gross income. Do not
deduct taxes, repairs,
etc., to determine the
gross income from rental
property.
Gross income includes
a partner's share of the
gross, not a share of
the net, partnership
income.
Gross income also
includes all
unemployment
compensation and certain
scholarship and
fellowship grants.
Scholarships received by
degree candidates that
are used for tuition,
fees, supplies, books,
and equipment required
for particular courses
may not be included in
gross income. For more
information about
scholarships, see
chapter 13.
Tax-exempt income,
such as certain social
security payments, is
not included in gross
income.
Disabled dependents.
For this gross income
test, gross income does
not include income
received by a
permanently and totally
disabled individual for
services performed at a
sheltered workshop. The
availability of medical
care must be the main
reason the individual is
at the workshop. Also,
the income must come
solely from activities
at the workshop that are
incident to this medical
care. A sheltered
workshop is a school
operated by certain
tax-exempt
organizations, or by a
state, a U.S.
possession, a political
subdivision of a state
or possession, the
United States, or the
District of Columbia,
that provides special
instruction or training
designed to alleviate
the disability of the
individual.
Child
defined.
For purposes of the
gross income test, your
child is your son,
stepson, daughter,
stepdaughter, a legally
adopted child, or a
child who was placed
with you by an
authorized placement
agency for your legal
adoption. A foster child
who was a member of your
household for your
entire tax year is also
considered your child.
Child
under age 19.
If your child is under
19 at the end of the
year, the gross income
test does not apply.
Your child can have any
amount of income and you
still can claim an
exemption if the other
dependency tests,
including the support
test, are met.
Example.
Marie, 18, earned
$4,000. Her father
provided more than
half her support.
Because Marie is
under 19, the gross
income test does not
apply. If the other
dependency tests
were met, Marie's
father can claim an
exemption for her.
Student
under age 24. The
gross income test does
not apply if your child
is a student who is
under age 24 at the end
of the calendar year.
The other dependency
tests still must be met.
Student defined.
To qualify as a
student, your child must
be, during some part of
each of 5 calendar
months during the
calendar year (not
necessarily
consecutive):
A full-time
student at a
school that has
a regular
teaching staff,
course of study,
and regularly
enrolled body of
students in
attendance, or
A student
taking a
full-time,
on-farm training
course given by
a school
described in (1)
above or a
state, county,
or local
government.
Full-time student
defined. A
full-time student is a
person who is enrolled
for the number of hours
or courses the school
considers to be
full-time attendance.
School defined.
The term “school”
includes elementary
schools, junior and
senior high schools,
colleges, universities,
and technical, trade,
and mechanical schools.
It does not include
on-the-job training
courses, correspondence
schools, and night
schools.
Example.
James, 22,
attends college as a
full-time student.
During the summer,
James earned $4,000.
If the other
dependency tests are
met, his parents can
take the exemption
for James.
Vocational high school
students.
People who work on “co-op”
jobs in private industry
as a part of the
school's prescribed
course of classroom and
practical training are
considered full-time
students.
Night school.
Your child is not a
full-time student while
attending school only at
night. However,
full-time attendance at
a school can include
some attendance at night
as part of a full-time
course of study.
Support Test
Generally, you must
provide more than half of a
person's total support
during the calendar year to
meet the support test.
However, there are special
rules that apply in the
following two situations.
Two or more
persons provide
support, but no one
person provides more
than half of a
person's total
support. See
Multiple Support
Agreement,
later.
The person
supported is the
child of divorced or
separated parents.
See
Support Test for
Child of Divorced or
Separated Parents,
later.
How to
determine if test is
met. You figure
whether you have
provided more than half
of a person's total
support by comparing the
amount you contributed
to that person's support
with the entire amount
of support that person
received from all
sources. This includes
support the person
provided from his or her
own funds.
You may find
Table 3-1
Table 3-1.
Worksheet for
Determining
Support
Keep for
your Records
Funds
Belonging
to the
Person
You
Supported
1.
Enter
the
total
funds
belonging
to the
person
you
supported,
including
income
received
(taxable
and
nontaxable)
and
amounts
borrowed
during
the
year,
plus the
amount
in
savings
and
other
accounts
at the
beginning
of the
year
1.
2.
Enter
the
amount
on line
1 that
was used
for the
person's
support
2.
3.
Enter
the
amount
on line
1 that
was used
for
other
purposes
3.
4.
Enter
the
total
amount
in the
person's
savings
and
other
accounts
at the
end of
the year
4.
5.
Add
lines 2
through
4. (This
amount
should
equal
line 1.)
5.
Expenses
for
Entire
Household
(where
the
person
you
supported
lived)
6.
Lodging
(complete
line 6a
or 6b):
6a.
Enter
the
amount
of rent
paid
6a.
6b.
Enter
the fair
rental
value of
home. If
the
person
you
supported
owned
the
home,
also
include
this
amount
in line
20.
6b.
7.
Enter
the
total
food
expenses
7.
8.
Enter
the
total
amount
of
utilities
(heat,
light,
water,
etc. not
included
in line
6a or
6b)
8.
9.
Enter
the
total
amount
of
repairs
(not
included
in line
6a or
6b)
9.
10.
Enter
the
total of
other
expenses.
Do not
include
expenses
of
maintaining
the
home,
such as
mortgage
interest,
real
estate
taxes,
and
insurance.
10.
11.
Add
lines 6
through
10.
These
are the
total
household
expenses
11.
12.
Enter
total
number
of
persons
who
lived in
the
household
12.
Expenses
for the
Person
You
Supported
13.
Divide
line 11
by line
12. This
is the
person's
share of
the
household
expenses
13.
14.
Enter
the
person's
total
clothing
expenses
14.
15.
Enter
the
person's
total
education
expenses
15.
16.
Enter
the
person's
total
medical
and
dental
expenses
not paid
for or
reimbursed
by
insurance
16.
17.
Enter
the
person's
total
travel
and
recreation
expenses
17.
18.
Enter
the
total of
the
other
person's
other
expenses
18.
19.
Add
lines 13
through
18. This
is the
total
cost of
the
person's
support
for the
year
19.
Did You
Provide
More
Than
Half?
20.
Enter
the
amount
from
line 2,
plus the
amount
from
line 6b
if the
person
you
supported
owned
the
home.
This is
the
amount
the
person
provided
for his
or her
own
support
20.
21.
Enter
the
amount
others
provided
for the
person's
support.
Include
amounts
provided
by
state,
local,
and
other
welfare
societies
or
agencies.
Do not
include
any
amounts
included
on line
1.
21.
22.
Add
lines 20
and 21
22.
23.
Subtract
line 22
from
line 19.
This is
the
amount
you
provided
for the
person's
support
23.
24.
Multiply
line 19
by 50%
(.50)
24.
Is
line 23
more
than
line 24?
Yes.
You meet
the
support
test for
the
person.
If the
other
dependency
tests
are met,
you can
claim an
exemption
for the
person.
No.
You do
not meet
the
support
test for
the
person.
You
cannot
claim an
exemption
for the
person
unless
you can
do so
under a
multiple
support
agreement.
See
Multiple
Support
Agreement
later in
this
chapter.
helpful in figuring
whether you provided
more than half of a
person's support.
Person's own funds not
used for support.
A person's own funds
are not support unless
they are actually spent
for support.
Example.
Your mother
received $2,400 in
social security
benefits and $300 in
interest. She paid
$2,000 for lodging
and $400 for
recreation. She put
$300 in a savings
account.
Even though your
mother received a
total of $2,700, she
spent only $2,400
for her own support.
If you spent more
than $2,400 for her
support and no other
support was
received, you have
provided more than
half of her support.
Child's
wages used for own
support.
You cannot include in
your contribution to
your child's support any
support that is paid for
by the child with the
child's own wages, even
if you paid the wages.
Year
support is provided.
The year you provide
the support is the year
you pay for it, even if
you do so with borrowed
money that you repay in
a later year.
If you use a fiscal
year to report your
income, you must provide
more than half of the
dependent's support for
the calendar year in
which your fiscal year
begins.
Armed
Forces dependency
allotments.
The part of the
allotment contributed by
the government and the
part taken out of your
military pay are both
considered provided by
you in figuring whether
you provide more than
half of the support. If
your allotment is used
to support persons other
than those you name, you
can take the exemptions
for them if they
otherwise qualify.
Example.
You are in the
Armed Forces. You
authorize an
allotment for your
widowed mother that
she uses to support
herself and your
sister. If the
allotment provides
more than half of
their support, you
can take an
exemption for each
of them, if they
otherwise qualify,
even though you
authorize the
allotment only for
your mother.
Tax-exempt military
quarters allowances.
These allowances are
treated the same way as
dependency allotments in
figuring support. The
allotment of pay and the
tax-exempt basic
allowance for quarters
are both considered as
provided by you for
support.
Tax-exempt income.
In figuring a person's
total support, include
tax-exempt income,
savings, and borrowed
amounts used to support
that person. Tax-exempt
income includes certain
social security
benefits, welfare
benefits, nontaxable
life insurance proceeds,
Armed Forces family
allotments, nontaxable
pensions, and tax-exempt
interest.
Example 1.
You provide
$4,000 toward your
mother's support
during the year. She
has earned income of
$600, nontaxable
social security
benefit payments of
$4,800, and
tax-exempt interest
of $200. She uses
all these for her
support. You cannot
claim an exemption
for your mother
because the $4,000
you provide is not
more than half of
her total support of
$9,600.
Example 2.
Your daughter
takes out a student
loan of $2,500 and
uses it to pay her
college tuition. She
is personally
responsible for the
loan. You provide
$2,000 toward her
total support. You
cannot claim an
exemption for your
daughter because you
provide less than
half of her support.
Social security benefit
payments.
If a husband and wife
each receive payments
that are paid by one
check made out to both
of them, half of the
total paid is considered
to be for the support of
each spouse, unless they
can show otherwise.
If a child receives
social security benefits
and uses them toward his
or her own support, the
payments are considered
as provided by the
child.
Support provided by the
state (food stamps,
housing, etc.).
Benefits provided by
the state to a needy
person generally are
considered support
provided by the state.
However, payments based
on the needs of the
recipient will not be
considered as used
entirely for that
person's support if it
is shown that part of
the payments were not
used for that purpose.
Foster
care payments and
expenses.
Payments you receive
for the support of a
foster child from a
child placement agency
are considered support
provided by the agency.
Similarly, payments you
receive for the support
of a foster child from a
state or county are
considered support
provided by the state or
county.
If you are not in the
trade or business of
providing foster care
and your unreimbursed
out-of-pocket expenses
in caring for a foster
child were mainly to
benefit an organization
qualified to receive
deductible charitable
contributions, the
expenses are deductible
as charitable
contributions, but are
not considered support
you provided. For more
information about the
deduction for charitable
contributions, see
chapter 26. If your
unreimbursed expenses
are not deductible as
charitable
contributions, they are
considered support you
provided.
If you are in the
trade or business of
providing foster care,
your unreimbursed
expenses are not
considered support
provided by you.
Home
for the aged.
If you make a lump-sum
advance payment to a
home for the aged to
take care of your
relative for life and
the payment is based on
that person's life
expectancy, the amount
of support you provide
each year is the
lump-sum payment divided
by the relative's life
expectancy. The amount
of support you provide
also includes any other
amounts that you
provided during the
year.
Figure 3-A. Can
You Claim an
Exemption for a
Dependent?
Total
Support
To figure if you
provided more than half
of a person's support,
you must first determine
the total support
provided for that
person. Total support
includes amounts spent
to provide food,
lodging, clothing,
education, medical and
dental care, recreation,
transportation, and
similar necessities.
Generally, the amount
of an item of support is
the amount of the
expense incurred in
providing that item. For
lodging, the amount of
support is the fair
rental value of the
lodging.
Expenses that are not
directly related to any
one member of a
household, such as the
cost of food for the
household, must be
divided among the
members of the
household.
Example.
Your parents live
with you, your
spouse, and your two
children in a house
you own. The fair
rental value of your
parents' share of
lodging is $2,000 a
year, which includes
furnishings and
utilities. Your
father receives a
nontaxable pension
of $4,200, which he
spends equally
between your mother
and himself for
items of support
such as clothing,
transportation, and
recreation. Your
total food expense
for the household is
$6,000. Your heat
and utility bills
amount to $1,200.
Your mother has
hospital and medical
expenses of $600,
which you pay during
the year. Figure
your parents' total
support as follows:
Support
Provided
Father
Mother
Fair
rental
value of
lodging
$1,000
$1,000
Pension
spent
for
their
support
2,100
2,100
Share of
food
(1/6 of
$6,000)
1,000
1,000
Medical
expenses
for
mother
600
Parents'
total
support
$4,100
$4,700
You must apply
the support test
separately to each
parent. You provide
$2,000 ($1,000
lodging, $1,000
food) of your
father's total
support of $4,100 —
less than half. You
provide $2,600 to
your mother ($1,000
lodging, $1,000
food, $600 medical)
— more than half of
her total support of
$4,700. You meet the
support test for
your mother, but not
your father. Heat
and utility costs
are included in the
fair rental value of
the lodging, so
these are not
considered
separately.
Lodging defined.
If you provide a
person with lodging,
you are considered
to provide support
equal to the fair
rental value of the
room, apartment,
house, or other
shelter in which the
person lives. Fair
rental value
includes a
reasonable allowance
for the use of
furniture and
appliances and for
heat and other
utilities that are
provided.
Fair rental
value defined.
This is the amount
you could reasonably
expect to receive
from a stranger for
the same kind of
lodging. It is used
instead of actual
expenses, such as
rent, taxes,
interest,
depreciation, paint,
insurance,
utilities, cost of
furniture and
appliances, etc. In
some cases, fair
rental value may be
equal to the rent
paid.
If you provide the
total lodging, the
amount of support
you provide is the
fair rental value of
the room the person
uses, or a share of
the fair rental
value of the entire
dwelling if the
person has use of
your entire home. If
you do not provide
the total lodging,
the total fair
rental value must be
divided depending on
how much of the
total lodging you
provide. If you
provide only a part
and the person
supplies the rest,
the fair rental
value must be
divided between both
of you according to
the amount each
provides.
Example.
Your parents
live rent free
in a house you
own. It has a
fair rental
value of $5,400
a year
furnished, which
includes a fair
rental value of
$3,600 for the
house and $1,800
for the
furniture. This
does not include
heat and
utilities. The
house is
completely
furnished with
furniture
belonging to
your parents.
You pay $600 for
their utility
bills. Utilities
are not usually
included in rent
for houses in
the area where
your parents
live. Therefore,
you consider the
total fair
rental value of
the lodging to
be $6,000
($3,600 fair
rental value of
the unfurnished
house, $1,800
allowance for
the furnishings
provided by your
parents, and
$600 cost of
utilities) of
which you are
considered to
provide $4,200
($3,600 + $600).
Person living in
his or her own home.
The total fair
rental value of a
person's home that
he or she owns is
considered support
contributed by that
person.
Living with
someone rent free.
If you live with a
person rent free in
his or her home, you
must reduce the
amount you provide
for support by the
fair rental value of
lodging he or she
provides you.
Property.
Property provided
as support is
measured by its fair
market value. Fair
market value is the
price that property
would sell for on
the open market. It
is the price that
would be agreed upon
between a willing
buyer and a willing
seller, with neither
being required to
act, and both having
reasonable knowledge
of the relevant
facts.
Capital
expenses.
Capital items,
such as furniture,
appliances, and
cars, that are
bought for a person
during the year can
be included in total
support under
certain
circumstances.
The following
examples show when a
capital item is or
is not support.
Example 1.
You buy a
$200 power lawn
mower for your
13-year-old
child. The child
is given the
duty of keeping
the lawn
trimmed. Because
a lawn mower is
ordinarily an
item you buy for
personal and
family reasons
that benefits
all members of
the household,
you cannot
include the cost
of the lawn
mower in the
support of your
child.
Example 2.
You buy a
$150 television
set as a
birthday present
for your
12-year-old
child. The
television set
is placed in
your child's
bedroom. You can
include the cost
of the
television set
in the support
of your child.
Example 3.
You pay
$5,000 for a car
and register it
in your name.
You and your
17-year-old
daughter use the
car equally.
Because you own
the car and do
not give it to
your daughter
but merely let
her use it, you
cannot include
the cost of the
car in your
daughter's total
support.
However, you can
include in your
daughter's
support your
out-of-pocket
expenses of
operating the
car for her
benefit.
Example 4.
Your
17-year-old son,
using personal
funds, buys a
car for $4,500.
You provide all
the rest of your
son's support —
$4,000. Since
the car is
bought and owned
by your son, the
car's fair
market value
($4,500) must be
included in his
support. The
$4,000 support
you provide is
less than half
of his total
support of
$8,500. You
cannot claim an
exemption for
your son.
Medical insurance
premiums.
Medical insurance
premiums you pay,
including premiums
for supplementary
Medicare coverage,
are included in the
support you provide.
Medical
insurance benefits.
Medical insurance
benefits, including
basic and
supplementary
Medicare benefits,
are not part of
support.
Tuition payments and
allowances under the
GI Bill.
Amounts veterans
receive under the GI
Bill for tuition
payments and
allowances while
they attend school
are included in
total support.
Example.
During the
year, your son
receives $2,200
from the
government under
the GI Bill. He
uses this amount
for his
education. You
provide the rest
of his support —
$2,000. Because
GI benefits are
included in
total support,
your son is not
your dependent.
Child care expenses.
If you pay someone
to provide child
care or disabled
dependent care, you
can include these
payments in the
amount you provided
for the support of
your child or
disabled dependent,
even if you claim a
credit for the
payments. For
information on the
credit, see chapter
34.
Other support items.
Other items may be
considered as
support depending on
the facts in each
case.
Do Not
Include in
Total
Support
The following items
are not included in
total support.
Federal,
state, and local
income taxes
paid by persons
from their own
income.
Social
security and
Medicare taxes
paid by persons
from their own
income.
Life
insurance
premiums.
Funeral
expenses.
Scholarships
received by your
child if your
child is a
full-time
student.
Survivors'
and Dependents'
Educational
Assistance
payments used
for support of
the child who
receives them.
Table 3-1.
Worksheet for
Determining
Support
Keep for
your Records
Funds
Belonging
to the
Person
You
Supported
1.
Enter
the
total
funds
belonging
to the
person
you
supported,
including
income
received
(taxable
and
nontaxable)
and
amounts
borrowed
during
the
year,
plus the
amount
in
savings
and
other
accounts
at the
beginning
of the
year
1.
2.
Enter
the
amount
on line
1 that
was used
for the
person's
support
2.
3.
Enter
the
amount
on line
1 that
was used
for
other
purposes
3.
4.
Enter
the
total
amount
in the
person's
savings
and
other
accounts
at the
end of
the year
4.
5.
Add
lines 2
through
4. (This
amount
should
equal
line 1.)
5.
Expenses
for
Entire
Household
(where
the
person
you
supported
lived)
6.
Lodging
(complete
line 6a
or 6b):
6a.
Enter
the
amount
of rent
paid
6a.
6b.
Enter
the fair
rental
value of
home. If
the
person
you
supported
owned
the
home,
also
include
this
amount
in line
20.
6b.
7.
Enter
the
total
food
expenses
7.
8.
Enter
the
total
amount
of
utilities
(heat,
light,
water,
etc. not
included
in line
6a or
6b)
8.
9.
Enter
the
total
amount
of
repairs
(not
included
in line
6a or
6b)
9.
10.
Enter
the
total of
other
expenses.
Do not
include
expenses
of
maintaining
the
home,
such as
mortgage
interest,
real
estate
taxes,
and
insurance.
10.
11.
Add
lines 6
through
10.
These
are the
total
household
expenses
11.
12.
Enter
total
number
of
persons
who
lived in
the
household
12.
Expenses
for the
Person
You
Supported
13.
Divide
line 11
by line
12. This
is the
person's
share of
the
household
expenses
13.
14.
Enter
the
person's
total
clothing
expenses
14.
15.
Enter
the
person's
total
education
expenses
15.
16.
Enter
the
person's
total
medical
and
dental
expenses
not paid
for or
reimbursed
by
insurance
16.
17.
Enter
the
person's
total
travel
and
recreation
expenses
17.
18.
Enter
the
total of
the
other
person's
other
expenses
18.
19.
Add
lines 13
through
18. This
is the
total
cost of
the
person's
support
for the
year
19.
Did You
Provide
More
Than
Half?
20.
Enter
the
amount
from
line 2,
plus the
amount
from
line 6b
if the
person
you
supported
owned
the
home.
This is
the
amount
the
person
provided
for his
or her
own
support
20.
21.
Enter
the
amount
others
provided
for the
person's
support.
Include
amounts
provided
by
state,
local,
and
other
welfare
societies
or
agencies.
Do not
include
any
amounts
included
on line
1.
21.
22.
Add
lines 20
and 21
22.
23.
Subtract
line 22
from
line 19.
This is
the
amount
you
provided
for the
person's
support
23.
24.
Multiply
line 19
by 50%
(.50)
24.
Is
line 23
more
than
line 24?
Yes.
You meet
the
support
test for
the
person.
If the
other
dependency
tests
are met,
you can
claim an
exemption
for the
person.
No.
You do
not meet
the
support
test for
the
person.
You
cannot
claim an
exemption
for the
person
unless
you can
do so
under a
multiple
support
agreement.
See
Multiple
Support
Agreement
later in
this
chapter.
Multiple
Support
Agreement
Sometimes no one provides
more than half of the
support of a person.
Instead, two or more
persons, each of whom would
be able to take the
exemption but for the
support test, together
provide more than half of
the person's support.
When this happens, you
can agree that any one of
you who individually
provides more than 10% of
the person's support, but
only one, can claim an
exemption for that person.
Each of the others must sign
a statement agreeing not to
claim the exemption for that
year. The person who claims
the exemption must keep
these signed statements for
his or her records. A
multiple support declaration
identifying each of the
others who agreed not to
claim the exemption must be
attached to the return of
the person claiming the
exemption. Form 2120,
Multiple Support
Declaration, can be used for
this purpose.
Example 1.
You, your sister, and
your two brothers
provide the entire
support of your mother
for the year. You
provide 45%, your sister
35%, and your two
brothers each provide
10%. Either you or your
sister can claim an
exemption for your
mother. The other must
sign a statement
agreeing not to take an
exemption for your
mother. The one who
claims the exemption
must attach a Form 2120
or similar declaration
to his or her return and
must keep the statement
signed by the other for
his or her records.
Because neither brother
provides more than 10%
of the support, neither
can take the exemption
and neither has to sign
a statement.
Example 2.
You and your brother
each provide 20% of your
mother's support for the
year. The remaining 60%
of her support is
provided equally by two
persons who are not
related to her. She does
not live with them.
Because more than half
of her support is
provided by persons who
cannot claim an
exemption for her, no
one can take the
exemption.
Example 3.
Your father lives
with you and receives
25% of his support from
social security, 40%
from you, 24% from his
brother, and 11% from a
friend. Either you or
your uncle can take the
exemption for your
father if the other
signs a statement
agreeing not to. The one
who takes the exemption
must attach a Form 2120
or a similar declaration
to his return and must
keep for his records the
signed statement from
the one agreeing not to
take the exemption.
Support Test
for Child of
Divorced or
Separated
Parents
The support test for a
child of divorced or
separated parents is based
on the special rules
explained here and shown in
Figure 3-B.
However, these special rules
apply only if all of the
following are true.
The parents are
divorced or legally
separated under a
decree of divorce or
separate
maintenance, or
separated under a
written separation
agreement, or lived
apart at all times
during the last 6
months of the
calendar year.
One or both
parents provide more
than half of the
child's total
support for the
calendar year.
One or both
parents have custody
of the child for
more than half of
the calendar year.
“Child”
is defined earlier under
Gross Income Test.
This discussion does not
apply if the support of the
child is determined under a
multiple support agreement,
discussed earlier.
General
rule. The parent
who has custody of the
child for the greater
part of the year (the
custodial parent) is
generally treated as the
parent who provides more
than half of the child's
support. It does not
matter whether the
custodial parent
actually provided more
than half of the
support.
Custody.
Custody is usually
determined by the terms
of the most recent
decree of divorce or
separate maintenance, or
a later custody decree.
If there is no decree,
use the written
separation agreement. If
neither a decree nor
agreement establishes
custody, then the parent
who has the physical
custody of the child for
the greater part of the
year is considered to
have custody of the
child. This also applies
if the validity of a
decree or agreement
awarding custody is
uncertain because of
legal proceedings
pending on the last day
of the calendar year.
If the parents are
divorced or separated
during the year and had
joint custody of the
child before the
separation, the parent
who has custody for the
greater part of the rest
of the year is
considered to have
custody of the child for
the tax year.
Example 1.
Under the terms
of your divorce, you
have custody of your
child for 10 months
of the year. Your
former spouse has
custody for the
other 2 months. You
and your former
spouse provide the
child's total
support. You are
considered to have
provided more than
half of the support
of the child.
However, see
Exception, later.
Example 2.
You and your
former spouse
provided your
child's total
support for 2004.
For the first 8
months of the year,
you had custody of
your child under
your 1996 divorce
decree (the most
recent decree at the
time). On August 31,
2004, a new custody
decree granted
custody to your
former spouse.
Because you had
custody for the
greater part of the
year, you are
considered to have
provided more than
half of your child's
support, unless the
exception described
next applies.
Exception.
The noncustodial
parent will be treated
as providing more than
half of the child's
support if:
The
custodial parent
signs a written
declaration that
he or she will
not claim the
exemption for
the child, and
the noncustodial
parent attaches
this written
declaration to
his or her
return,
The
custodial parent
signed a decree
or agreement
executed after
1984 stating he
or she will not
claim the
exemption for
the child and
that the
noncustodial
parent can claim
an exemption for
the child
without regard
to any
condition, such
as payment of
support, and the
noncustodial
parent attaches
to his or her
return the
documentation
described later
under
Divorce
decree or
separation
agreement made
after 1984,
or
A decree or
agreement
executed before
1985 provides
that the
noncustodial
parent is
entitled to the
exemption, and
he or she
provides at
least $600 for
the child's
support during
the year, unless
the pre-1985
decree or
agreement is
modified after
1984 to specify
that this
provision will
not apply.
Noncustodial parent.
The noncustodial
parent is the parent who
has custody of the child
for the shorter part of
the year or who does not
have custody at all.
Written declaration.The custodial parent
may use either Form 8332
or a similar statement
(containing the same
information required by
the form) to make the
written declaration to
release the exemption to
the noncustodial parent.
The noncustodial parent
must attach the form or
statement to his or her
tax return.
The exemption can be
released for a single
year, for a number of
specified years (for
example, alternate
years), or for all
future years, as
specified in the
declaration. If the
exemption is released
for more than one year,
the original release
must be attached to the
return of the
noncustodial parent for
the first year, and a
copy must be attached
for each later year.
Divorce decree or
separation agreement
made after 1984.If your divorce
decree or separation
agreement was executed
after 1984, the
noncustodial parent does
not have to attach Form
8332 if both of the
following requirements
are met.
The decree
or agreement is
signed by the
custodial parent
and states all
of the
following.
The
custodial
parent
will not
claim
the
child as
a
dependent
for the
year.
The
noncustodial
parent
can
claim
the
child as
a
dependent
without
regard
to any
condition,
such as
payment
of
support.
The
years
for
which
the
noncustodial
parent,
rather
than the
custodial
parent,
can
claim
the
child as
a
dependent.
The
noncustodial
parent attaches
a copy of the
following pages
of the decree or
agreement to his
or her tax
return.
The
cover
page
(write
the
other
parent's
social
security
number
on this
page).
The
pages
that
contain
the
information
shown in
item
(1).
The
signature
page
with the
other
parent's
signature
and the
date of
the
agreement.
If these
requirements are not
met, the noncustodial
parent must attach to
his or her return Form
8332 or a similar
statement from the
custodial parent
releasing the exemption.
Figure 3-B.
Support Test for
Children of
Divorced or
Separated
Parents
Child
support.
All child support
payments actually
received from the
noncustodial parent are
considered used for the
support of the child.
Example.
The noncustodial
parent provides
$1,200 for the
child's support.
This amount is
considered support
provided by the
noncustodial parent
even if the $1,200
was actually spent
on things other than
support.
Paid in a later year.
If you fail to pay
child support in the
year it is due, but pay
it in a later year, your
payment of the overdue
amount is not considered
paid for the support of
your child, either for
the year the payment was
due or for the year it
is paid. It is payment
of an amount you owed to
the custodial parent,
but it is not considered
paid by you for the
support of your child.
Example.
You owed but
failed to pay child
support last year.
This year, you pay
all of the amount
owed from last year
and the full amount
due for this year.
Your payment of this
year's child support
counts as your
support for this
year, but your
payment of the
amount owed from
last year does not
count as support
either for this year
or for last year.
Third-party support.
Support provided by a
third party for a
divorced or separated
parent is not included
as support provided by
that parent. However,
see
Remarried parent,
later.
Example.
You are divorced.
During the entire
year, you and your
child live with your
mother in a house
she owns. The fair
rental value of the
lodging provided by
your mother for your
child is $3,000. The
home provided by
your mother is not
included in the
amount of support
you provide.
Remarried parent.
If you remarry, the
support provided by your
new spouse is treated as
provided by you.
Example.
You have two
children from a
former marriage who
live with you. You
have remarried and
are living in a home
owned by your new
spouse. The fair
rental value of the
home provided to the
children by your new
spouse is treated as
provided by you.
Home
jointly owned.
If you and your former
spouse have the right to
use and live in the
home, each of you is
considered to provide
half of your child's
lodging. However, if the
divorce decree gives
only you the right to
use and live in the
home, you are considered
to provide your child's
entire lodging. It does
not matter if the legal
title to the home
remains in the names of
both parents.
Parents
who never married.
These special rules
for divorced or
separated parents also
apply to parents who
never married.
Phaseout of
Exemptions
The amount you can claim as a
deduction for exemptions is
phased out once your adjusted
gross income (AGI) goes above a
certain level for your filing
status. These levels are as
follows:
Filing Status
AGI Level
Which Reduces
Exemption Amount
Married filing
separately
$ 107,025
Single
142,700
Head of household
178,350
Married filing
jointly
214,050
Qualifying widow(er)
214,050
If your AGI exceeds the level
for your filing status, use the
Deduction for Exemptions
Worksheet in the
instructions for Form 1040 to
figure the amount of your
deduction for exemptions.
You must reduce the dollar
amount of your exemptions by 2%
for each $2,500, or part of
$2,500 ($1,250 if you are
married filing separately), that
your AGI exceeds the amount
shown above for your filing
status. If your AGI exceeds the
amount shown by more than
$122,500 ($61,250 if married
filing separately), the amount
of your deduction for exemptions
is reduced to zero.
Social Security
Numbers for
Dependents
You must list the social
security number (SSN) of any
person for whom you claim an
exemption in column (2) of line
6c of your Form 1040 or Form
1040A.
If you do not list the
dependent's SSN when required or
if you list an incorrect SSN,
the exemption may be disallowed.
No SSN.If a person for whom you
expect to claim an exemption
on your return does not have
an SSN, either you or that
person should apply for an
SSN as soon as possible by
filing Form SS-5,
Application for a Social
Security Card, with the
Social Security
Administration (SSA).
Information about applying
for an SSN and Form SS-5 is
available at your local SSA
office.
It usually takes about 2
weeks to get an SSN. If you
do not have a required SSN
by the filing due date, you
can file Form 4868 for an
extension of time to file.
Born
and died in 2004.If your child was born
and died in 2004, and you do
not have an SSN for the
child, you may attach a copy
of the child's birth
certificate instead. If you
do, enter “DIED”
in column (2) of line 6c of
your Form 1040 or Form
1040A.
Alien or
adoptee with no SSN.
If your dependent does not
have and cannot get an SSN,
you must list the individual
taxpayer identification
number (ITIN) or adoption
taxpayer identification
number (ATIN) instead of an
SSN.
Taxpayer identification
numbers for aliens.
If your dependent is a
resident or nonresident
alien who does not have and
is not eligible to get an
SSN, your dependent must
apply for an individual
taxpayer identification
number (ITIN). Write the
number in column (2) of line
6c of your Form 1040 or Form
1040A. To apply for an ITIN,
use Form W-7, Application
for IRS Individual Taxpayer
Identification Number.
Taxpayer identification
numbers for adoptees.
If you have a child who
was placed with you by an
authorized placement agency,
you may be able to claim an
exemption for the child.
However, if you cannot get
an SSN or an ITIN for the
child, you must get an
adoption taxpayer
identification number (ATIN)
for the child from the IRS.
See Form W-7A, Application
for Taxpayer Identification
Number for Pending U.S.
Adoptions, for details.
