QOTW: Claiming a child who no longer lives with them?

Question of the Week: An absent child who moves out may still be a qualifying relative if all of the qualifications, including the support test, are met.

December 05, 2019

Q. Can parents claim a child who no longer lives with them?

After my clients’ 16-year old daughter had a child, she moved out of her parents’ house to the home of a friend. The friend’s mother lets her stay rent-free and even provides food, clothing, etc. The daughter is still a high-school student and has no income. She may be receiving some type of aid from the state for herself and the baby. The baby’s father is not in the picture. This all happened at the end of 2018. She has now lived in the friend’s home for all of 2019. My clients still give her money for living expenses and pay for her health insurance. They want to claim their daughter on their 2019 tax return, but the friend’s mother said she’ll claim the daughter for “all the credits.” Who can claim my clients’ daughter and what tax benefits would they get? Can anyone claim the daughter’s child?

A. It’s possible to claim both the child and grandchild, but you’ll need more information

Applying the tests to be a qualifying child

First, the daughter is not a qualifying child of either taxpayer. She is not a qualifying child of her parents because she does not live with them and, from this information, it doesn’t appear she can be treated as “temporarily absent.” The daughter is also not a qualifying child of the friend’s mother because she is not related to her. Because she is not a qualifying child, she is not a qualifying person for the child tax credit (CTC) or earned income credit (EIC).

Applying the tests to be a qualifying relative

Next, the daughter may be a qualifying relative of one of the taxpayers. In addition to your clients, the daughter also meets the relationship test for the friend’s mother as they lived together in the same home the entire year. The daughter has no gross income so it’s going to come down to which taxpayer provided more than half of her support. Any state-provided support is considered third party support. It’s best to complete a support worksheet and get as much information as you can about what support the friend’s mother provides and what the state provides.

If the parents provide more than half of her support, she is their qualifying relative. If it’s the friend’s mother who provides it, she is that taxpayer’s qualifying relative. In either case, the only tax credit available is the $500 credit for other dependents (ODC). If it turns out that the state is providing most of her support, then she is not a dependent of either taxpayer.

The same process has to be considered to determine which taxpayer can claim the baby. The daughter has no income and no tax filing requirement, so she is not a “taxpayer” for purposes of seeing if the baby is her qualifying child. Thus, you would see if the baby could be a qualifying relative of your clients (the baby’s grandparents) or the friend’s mother. Again it will come down to support, including possible state support. As with the daughter, the baby isn’t a qualifying person for the CTC or EIC.

Originally published in the 12/04/19 edition of TAX in the News

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