Filing Status and Dependents

Presented by: Jason Dinesen, EA

1
Introduction

2
Dependents in General

▷ The claiming of dependents on a tax return drives many other items

on the return, in particular:
○ Filing status
○ Tax credits
▷ We will talk about filing status in this course today as well
▷ But we must start with a discussion of dependents, because that will
help with understanding filing statuses

3
Dependents in General

There are 2 types of dependents a taxpayer can claim:

▷ Qualifying children
▷ Qualifying relatives

4
Tax Benefits

A qualifying child opens up the following benefits to the taxpayer:

▷ Child tax credit or Other Dependents Credit (depending on the child’s age)
▷ Head of household filing status
▷ Child and dependent care expenses
▷ Earned income credit
A qualifying relative provides these benefits to the taxpayer:
▷ Other dependent credit
▷ Maybe head of household filing status
▷ NO child tax credit or earned income credit

5
Common Rules

Some rules relating to dependents are the same for both qualifying children and
qualifying relatives. Those rules are:
▷ Someone claimed as a dependent cannot claim a dependent on their own tax
return.
▷ Someone who files a joint return with their spouse cannot be someone else’s
dependent (with one exception we will talk about later).
▷ The dependent must be a US citizen or national, or a resident of the US, Canada
or Mexico.
○ Exception: legally adopted children as long as the taxpayer is a US citizen or national
and the taxpayer’s home is the dependent’s place of residence.

6
SSNs

▷ Dependents must also have a Social Security Number, and in some

cases an adoption taxpayer identification number (ATIN) or
individual taxpayer identification number (ITIN) may suffice.
▷ Taxpayers going through the adoption process can use ATINs for
claiming a dependent, temporarily, until the dependent receives an
SSN.
▷ ITINs can be used to claim a dependent; however, the law says an
ITIN cannot be used for claiming certain tax benefits such as the
child tax credit.

7
Qualifying Child

8
Qualifying Child Tests

Qualifying Child Tests

1. Relationship
2. Residency
3. Age
4. Support
5. Married child
NOTE: the rules are different in situations of divorce or separation. We
will cover this later.

9
Poll

Which of these is not a test for qualifying child?

A. Parent provides more than half the support

B. Relationship
C. Residency
D. Age

10
Relationship Test

1
 Relationship Test

Section 152(c)(2) defines the relationship test as being met if the

dependent is:
▷ The taxpayer’s child or a “descendant of such child.” This means the
child must be the taxpayer’s child or grandchild.
▷ The taxpayer’s brother or sister; step-siblings also count. Note again
that “descendants” count too, meaning nieces or nephews.
What about adopted children or foster children? They count also with a
few details a practitioner needs to be aware of.

2
Adoption

▷ Tax law treats adopted children as a blood relative

▷ Section 152(f)(1)(B): at an adopted child is one who is legally
adopted or who has been placed with the taxpayer for legal
adoption.
What about foster children? See next slide.

3
Foster Children

Foster children are qualifying children of the taxpayer

▷ A foster child is a child “placed with the taxpayer by an authorized
placement agency or by judgment, decree, or other order of any
court of competent jurisdiction.” §152(f)(1)(C)
○ But foster kids are NOT considered blood relatives of the taxpayer
○ This becomes an issue as a foster child gets older and is aging out of the foster
system

4
The Residency Test

5
Residency Test

The residency test for qualifying child says the child must live with the
taxpayer for more than half the year.
▷ This means 183 days in a non-leap-year or 184 days in a leap year.
▷ Look at where the child sleeps.
▷ If a child is born, or dies, during the year, then the test is if they lived
with the taxpayer more than half of the time they were alive

6
Temporary Absences

Examples of temporary absences that do not count against the

residency test (considered to be time living with the taxpayer):
▷ Camp
▷ Illness
▷ Education – so a child away to college
▷ Business
▷ Vacation
▷ Military
▷ Other special circumstances

7
The Age Test

8
 Age Test
The age test says:
▷ The child must be under age 19 at the end of the year if the child is not a
student;
▷ Or under age 24 if a student;
▷ Or any age if totally and permanently disabled.
Also:
▷ The qualifying child must be younger than the taxpayer, unless the
dependent is disabled.
▷ If a taxpayer files a joint return with their spouse, the potential qualifying
child must be younger than the spouse.
▷ The term “student” means that the child attended an “educational
organization” as a full-time student for at least some part of at least 5
months during the year.

9
The Support Test

10
 Support Test
Many people, including tax pros, get the support test wrong
▷ The taxpayer DOES NOT need to provide ½ of the child’s support!
The rule is:
▷ The child cannot provide more than ½ of their own support
▷ While this will often be straightforward for most taxpayers, it can be an
issue if the child has significant sources of income on their own
▷ Example: a teenaged or college child has a part-time job – we need to
trace the usage of the funds from that job; if the child is just putting the
money in a savings account, then they are not providing their own support,
but if they are spending the money on support items, you could have a
problem.

11
The Joint Return Test

1
Joint Return Test

▷ If the child is married, the child cannot be claimed unless they DO

NOT file a joint return with their spouse,
▷ Or if the child does file a joint return with their spouse, it was only
to claim a refund of withheld taxes.
○ The couple must also not have a tax liability.

2
Qualifying Relatives

3
Qualifications

The other type of dependent is a qualifying relative. The rules to claim

someone as a qualifying relative are stricter than for a qualifying child
▷ Must be a “specified relative” of the taxpayer; if unrelated, the
person must live with the taxpayer all year
▷ The qualifying relative’s gross income for the year must be less than
the exemption amount for the year
▷ The taxpayer must provide more than 1/2 of the person’s support
▷ The dependent must not be a qualifying child of any other taxpayer

4
Specified Relative

The following relatives do not have to live with the taxpayer:

▷ Children, step-children, foster children, grandchildren
▷ Siblings, including step-siblings
▷ Parents and grandparents, including stepparents
▷ In-laws (father-, brother-, sister, mother-)
▷ Aunts, uncles, nieces and nephews if related by blood to the taxpayer
NOTE: cousins are not on the list!
▷ If a potential dependent does not meet one of these relationships, then they must
live with the taxpayer all year

5
Gross Income

The dependent’s gross income must be below the exemption amount

for the year
▷ Exemptions don’t exist from 2018-2025 due to the TCJA
▷ But the IRS still publishes “pro forma” exemption amounts for use
here
○ $5,200 for 2025
○ Does not include tax-exempt income (non-taxable scholarships; non-taxable portion of
Social Security)

6
 Support

The taxpayer must prove that they provide more than 1/2 of the
dependent’s support
▷ Nontaxable income IS considered in this test, if the income is used
for support (except scholarships if the dependent is the taxpayer’s
child)
▷ Government benefits are considered support provided by the
government! This could impact whether a taxpayer is actually
providing more than 1/2 of someone’s support

7
Multiple Support Agreements

If no one person provides more than 1/2 of someone’s support, a

multiple support agreement might come into play, if:
1. Two or more people can show that, combined, they provide more
than 1/2 of someone’s support
2. Anyone who provides more than 10% of the person’s support can
then claim the dependent

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 Multiple Support Agreement Example

George and his sister Betty each provide 45% of the support to their
mother, Mary. Mary provides 10% of her own support. Neither George
nor Betty provide more than 1/2 of Mary’s support, but combined they
do. A multiple support agreement could come into play:
▷George and Betty can decide which one of them will claim Mary
▷Whoever claims Mary will need to get a Form 2120 signed by the
other sibling; they will then claim Mary as a dependent and attach this
form to their tax return

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Not a Qualifying Child

The dependent cannot be anyone else’s qualifying child for the year
▷ If the child’s parents could claim the child as a qualifying child but do
not because they are not required to file a return and do not file a
return (or file one ONLY to get a refund of withheld taxes), then
someone else might be able to claim the child as a qualifying relative

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Example

▷ George and Martha are in a relationship but are unmarried; Martha

has a 5-year-old son named Thomas from a previous relationship.
George works and has a filing obligation; Martha is unemployed, has
no income, and no filing obligation
▷ Because Martha has no filing obligation, Thomas is not considered
her qualifying child, and so George can claim the dependency
exemption
▷ But since George is not Thomas’s father, George can only claim
Thomas as a qualifying relative

11
Miscellaneous Dependent
Scenarios

1
Disabled

The definition of disability comes from Section 22 of the Tax Code:

▷ “An individual is permanently and totally disabled if he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than 12 months.”

2
The Support Test and Scholarships

With scholarships:
▷ If the potential dependent is the taxpayer’s child, then do NOT
count scholarships as support
▷ All other relations, you DO count the scholarship as support
provided by the child to themselves

3
Other Education Issues and Support

Other issues can arise with college students — issues which can catch unwary parents
and practitioners off guard:
▷ A student loan taken out in the student’s name and which the student is obligated
to repay is support provided by the student.
▷ If the child/student is the beneficiary of a Section 529 account, amounts used from
these accounts is considered support provided by the child.
▷ If children work while in school, practitioners will need to watch if the income is
spent on support of the child. (If the money is put in a savings account and not
spent on support, then you might be okay; if the child is spending the money on
support, then there could be problems with the support test.)

4
Married Children

A taxpayer can claim a married child as a qualifying child if:

▷ Neither the child nor the child’s spouse is required to file a tax
return,
▷ Neither the child nor the spouse would have a tax liability if they
filed separate returns, and
▷ If the child and spouse file a return, it is filed solely to obtain a
refund of withheld taxes.

5
Year of Birth or Death

▷ If a child is born during the year, the residency test is met if the child
lives with the taxpayer more than half of the time the child was
alive.
▷ Same goes for a child who dies during the year.
▷ A child who is stillborn does not qualify as a dependent.

6
Divorce (as it relates to
dependents)

7
Divorce and Children

▷ When taxpayers are divorced or separated, the rules surrounding

qualifying children are different.
▷ It is vital to understand the terms “custodial parent,” and
“noncustodial parent.”
▷ Something to drill into your head: under tax law, only the custodial
parent can claim the child (but they can release the claim to the non-
custodial parent by filling out a form).
▷ And most-importantly, the IRS doesn’t care about a taxpayer’s divorce
decree! (But we also can’t ignore the divorce decree).

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 Custodial vs. Non-Custodial

Custodial Parent
▷ The custodial parent means who the child lives who the greater number of nights
during the year.
Non-Custodial Parent
▷ Simply, the parent who the child did not live with the greater number of nights
during the year.
Theoretically it is possible that a child could spend an equal number of nights with
each parent during the year. In this situation, the parent with the higher adjusted gross
income (AGI) wins the tiebreaker.
▷ All of this comes from Reg. 1.152-4; the specific citation regarding an equal
number of nights is 1.152-4(d)(1).

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 Divorce Decrees

The IRS doesn’t care about the divorce decree (but see warning on next slide).
▷ Numerous court cases through the years have confirmed: the dependency
exemption goes to the custodial parent.
▷ The custodial parent can release the exemption to the non-custodial parent by
filling out a form called Form 8332.
▷ The non-custodial parent must attach this form to their tax return. If they don’t
attach the form, they don’t get the dependency exemption regardless of what the
divorce decree says!
○ Exception: a non-custodial parent can use a divorce decree if the divorce happened
between 1985 and 2008. For divorces happening in 2009 and onward, the non-
custodial parent must have a Form 8332 regardless of what the divorce decree says.

10
 Warning
While your presenter says the IRS and Tax Court don’t care about the
divorce decree, this does not mean we can casually disregard it
▷ Other courts and judges outside of Tax Court certainly do care
about the divorce decree – your client and you could find yourselves
in big trouble if you do something contrary to the decree
▷ What your presenter is trying to say about the decree is, the non-
custodial parent can’t rely – for Form 1040 purposes – just on the
decree (unless it’s pre-2009), they need Form 8332 as well; if they
don’t have the 8332, the IRS will deny their claim

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 Form 8332
Form 8332 (Release/Revocation of Release of Claim to Exemption for Child by
Custodial Parent) is the form a custodial parent fills out to allow the non-custodial
parent to claim the dependency exemption and child tax credit for a child.
▷ In order for this to happen, the following must be true:
▷ The parents must be legally divorced or separated, or lived apart the last 6
months of the year.
▷ The child received over 1/2 of his or her support from the parents during the
year.
▷ The child is in the custody of one or both parents more than 1/2 the year, and
▷ The custodial parent signs a written declaration waving their claim to the child
(i.e. Form 8332).
▷ The non-custodial parent must send the Form 8332 to the IRS, either by mail
using Form 8453, or as an e-filing attachment (as a tax pro, your software
might allow for e-filing attachments).

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 Splitting Tax Benefits

A qualifying child qualifies a taxpayer for the following benefits:

▷ Child tax credit or other dependents credit
▷ Head of household filing status
▷ Child and dependent care expenses
▷ Earned income credit
▷ A non-custodial parent is only entitled to claim the child as a
dependent and claim the child tax credit (or other dependents
credit). A non-custodial parent cannot claim the other benefits.
▷ The custodial parent can still use the child to file as head of
household, claim daycare expenses, and claim the earned income
(assuming they qualify for these benefits).

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Tiebreakers

1
 Tiebreakers

▷ Only one taxpayer can claim all tax benefits associated with a
qualifying child
○ No splitting of benefits is allowed, like “I’ll claim the child tax credit and you
claim the earned income credit”
○ Except for divorced couples and the exemption/child tax credit via Form
8332, as we just discussed
▷ Otherwise, only one taxpayer can claim all of the benefits associated
with a qualifying child – what if more than one person might be able
to claim the child?
○ Enter … the tiebreaker rules

2
 Tiebreakers
There are 5 tiebreakers:
1. If one person is the biological (or adoptive or foster) parent and one is not, the
child is the qualifying child of the parent.
2. If the parents file a joint return together, the child is the qualifying child of the
parents.
3. If the parents do not file a joint return but both try to claim the same child, the IRS
will award the exemption to the parent that the child lived with more during the
year; if the child lived equally with both parents, the tiebreaker is the parent with
the higher AGI.
4. If no parent can claim the child, the person with the highest AGI who meets the
requirements to claim the child can claim the child as a qualifying child.
5. If a parent chooses not to claim a child, another person who qualifies may be able
to claim the child but only if their AGI is higher than that of the parent.

3
Qualifying Children

▷ Tiebreakers are unique to qualifying children.

▷ You won’t run into this problem with qualifying relatives because of
the requirement that the taxpayer provide more than 1/2 of the
person’s support.
○ But remember the possibility of multiple support agreements existing – this isn’t a
“tiebreaker,” though

4
Using the Tiebreakers

Here’s a scenario: Martha and her 2-year-old son, Thomas, live with
Martha’s mother, Frances. Martha’s AGI is $10,000; Frances’s is
$15,000. Assume that they all live together all year, and that Thomas
does not provide more than 1/2 of his own support. Also, assume that
Martha is an adult who is not in school and is not married. Who can
claim Thomas as a dependent?
▷ Martha is mom
▷ Frances is grandma

5
 Using the Tiebreakers
Buckle up!
Both Martha (mom) and Frances (grandma) pass all tests to claim
Thomas as a qualifying child.
▷ Relationship: passed (Thomas is Martha’s child and Frances’s
grandchild; both are qualifying relationships for qualified child).
▷ Residency: passed, as they all live together
▷ Age: passed, Thomas is of a proper age to pass the definition of a
qualifying child.
▷ Support: passed; Thomas does not provide more than 1/2 of his
own support.
▷ Joint return: passed; Thomas is not married

6
 Using the Tiebreakers

Thomas is the qualifying child of both Martha and Frances.

▷ Under tiebreaker 1, Martha (mom) is the one who can claim Thomas
because she’s the parent.
▷ But, tiebreaker 5 says the parent can choose to let someone else
claim the child, if the other person’s AGI is higher.
▷ Grandma’s AGI is indeed higher in this example, so under tiebreaker
5, Martha can choose not to claim Thomas and allow Frances
(grandma) to claim him instead.
You’d need to run the numbers on this to see – is it better for Grandma
to claim Thomas, or mom?

7
Using the Tiebreakers

▷ Note: in this last example, if mom’s AGI was higher than grandma’s,
then mom would be the only one who could claim the child
▷ Also: what if mom and grandma can’t agree on who claims the kid,
and both claim him on their tax returns?
○ The IRS will award the dependency exemption and all tax benefits to MOM
○ What about Tiebreaker 5? It only applies if the parent, with a lower AGI,
“chooses” to let someone else with a higher AGI claim the child

8
 Unmarried Parents

▷ When unmarried parents both qualify to claim a child, then the

tiebreaker rules do not apply
○ As long as both parents agree on who will claim the child.
▷ See Example 10 in Publication 501 under the IRS’s discussion of the
tiebreaker rules

9
Unmarried Parents

▷ Let’s look at an example of unmarried parents with children. George

and Martha live together but are unmarried; together they have a
son named Thomas. Assume that Thomas meets the age, support
and joint return tests. George’s AGI is $60,000; Martha’s AGI is
$30,000. Who can claim Thomas?

10
 Unmarried Parents
George and Martha can decide for themselves who claims Thomas. If
they have more than 1 kid, they can split the dependents up as they
please.
▷ As long as they both agree, then this is how it works. What if they
both try to claim Thomas?
○ In that situation, the IRS will award the dependency exemption to the parent
with the higher AGI.
▷ This possibility of the parents choosing for themselves who claims
the kids only applies if 1) both taxpayers are the biological or legal
parents of the kid, and 2) both taxpayers agree on who will claim the
kid.

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Filing Status

1
Filing Status

▷ A taxpayer’s filing status affects almost every other line on the tax
return.
▷ It impacts various income limitations, availability of credits and
deductions, and what tax bracket to use to calculate their tax
liability.

2
The 5 Statuses

There are five filing statuses:

1. Single
2. Married filing jointly
3. Married filing separately
4. Qualifying surviving spouse
5. Head of household

3
Key Questions

Filing status is based on two questions:

1. Is the taxpayer married, and
2. Do they have dependents?

4
Marital Status

▷ Marital status is determined as of the last day of the year. (Except

when the spouse dies during the year.)
○ A taxpayer whose divorce is finalized on December 31st is treated as a single person
all year.
○ A person who gets married on December 31st is treated as a married person all year.
▷ So, there is no proration of income between the time period in a
year a person was single versus when they were married; they’re
either single all year or married all year, for tax purposes.

5
Example

▷ Jerry and Mary fly to Las Vegas on December 31st and immediately
go to a local chapel, where an Elvis impersonator conducts a
wedding. The wedding is legal and Jerry and Mary are officially
married now.
▷ As long as this happens before midnight, they would be legally
married ALL YEAR for tax purposes.

6
Spouse Dies During the Year

▷ If a spouse dies during the year, the surviving spouse can file a joint
tax return with the deceased spouse for that year, as long as the
survivor doesn’t get remarried.
Example:
▷ Lou and Sue are married. On July 15th, Lou dies. Sue does not get
remarried before the end of the year. Sue can file a current year tax
return as married filing jointly with Lou.

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 Same-Gender Marriage; RDPs

▷ The federal government recognizes same-gender marriage; people in

such marriages file either married filing jointly or married filing
separately.
▷ The federal government DOES NOT recognize civil unions or
registered domestic partnerships (RDP) of any gender.
○ The lack of recognition has nothing to do with same-gender or opposite
gender — any gender in such a relationship is not recognized for federal tax
purposes.
○ People in a civil union or RDP file as either single or head of household.

8
Common-Law Marriage; Foreign Marriage

▷ The federal government does recognize common-law marriage.

○ Not every state has common-law marriage, and this is a legal issue more than a tax
issue (in your presenter’s opinion, we as practitioners cannot determine if someone is
in a common-law marriage), but we need to know it exists.
▷ Additionally, “marriage” includes marriages in foreign countries, as
long as the marriage would be valid in at least one state in the U.S.

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Annulled Marriages

Practitioners may sometimes run across annulled marriages

▷ An annulment means the marriage is treated as never happening
▷ If a marriage and an annulment happen in the same year: taxpayer is
an unmarried person all year
▷ If an annulment happens in a later year, the marriage is voided as of
the date of marriage:
○ If a tax return using a married filing status (joint or separate) has already been
filed for a prior year, an amendment would be required to change the status
to single or head of household on any open years (there’s nothing to do if it’s a
closed year)

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Head of Household

1
 Head of Household

To qualify as head of household (HOH), a taxpayer must:

1. Be unmarried or considered unmarried on the last day of the tax year;
2. not be a surviving spouse;
3. not be a non-resident alien at any time during the tax year; and either
4. maintain as his or her home a household a home which is the principle residence of
either a qualifying child, or certain qualifying relatives. ***OR***
5. maintain a household that is the principal home of the taxpayer’s parent if the
taxpayer can claim the parent as a dependent. (This means a taxpayer could file as
head of household even if the parent doesn’t live with them.)
Item 3 is straightforward enough, but let’s consider the other items on the upcoming
slides.

2
Unmarried

The first requirement is to be unmarried. For taxpayers who are

unmarried, this is simple enough.
▷ As discussed earlier, marital status is determined as of the last day of
the year.
○ So, a taxpayer who gets divorced in December is considered unmarried all year and
would be eligible for HOH filing status (if they meet the other requirements).

3
HOH: Unmarried

In some cases, a taxpayer who is still married on December 31st may still be able to
use HOH status if:
1. Separate returns are filed.
2. The taxpayer's home was, for more than half the year, the principal home of the
taxpayer's child, stepchild, or an adopted child claimed as a dependent (or would have
been claimed as a dependent except the custodial parent waives the claim to the child
using Form 8332)
3. The taxpayer paid more than half the cost of maintaining the home for the tax year.
4. The taxpayer did not live with the spouse during the last six months of the tax year.

4
 Example

▷ Betty and Mark are on the rocks. On May 15, Betty moves out and starts renting
an apartment.
▷ Her and Mark’s 5-year-old son lives with her in the apartment. Betty pays all of
the costs associated with the apartment.
▷ Betty and Mark are going to get divorced but the divorce is not finalized by
December 31st.
▷ Betty can file as HOH this year, because she lived apart from Mark for the last six
months of the year and she paid more than half the cost of maintaining a home of a
qualifying dependent. (Mark would file as married filing separately.)
○ NOTE: if Betty and Mark decide that they want to file a joint return this year, then
they file as married filing jointly and Betty would NOT be able to file as HOH.

5
Marriage to a Non-Resident Alien

▷ Taxpayers are also considered unmarried (for HOH purposes) if their spouse is a
non-resident alien.
▷ If a taxpayer who is married to a non-resident alien is otherwise eligible for HOH
status, they could use HOH.
○ Filing status options when married to a non-resident alien would be married filing
jointly (but this opens up the non-resident spouse to U.S. taxation on worldwide
income, plus the draconian FBAR and FATCA requirements), married filing separately,
or HOH (if the taxpayer meets the other qualifiers for HOH).

6
HOH: Surviving Spouse

▷ This one is straightforward enough. If a spouse dies during the year

and the taxpayer does not remarry, they are still considered married
for that year and file either jointly or separately with the deceased
spouse, not as HOH.
▷ If they meet the qualifications in the next two tax years, they would
file as a qualifying surviving spouse (see discussion on that coming
up), not HOH.

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Maintain a Home

The rule about maintaining a home means, the taxpayer must maintain a house that is
the principal place of residence for the year of a qualifying child or certain qualifying
relatives.
▷ The dependent must live with the taxpayer, unless the dependent is a parent.
More on that in a minute.
First, what relatives count here?
1. Any qualifying child unless the child is married and files a joint return,
2. Specified relatives who are qualifying relatives. Look to Section 152(d)(2)(A-G) --
see next slide.

8
 Specified Relatives

Specified relatives are:

▷ A child or a descendant of a child (i.e. grandchildren) (includes foster children and
adopted children)
▷ Brother, sister, stepbrother, or stepsister
▷ Father or mother, or an ancestor of either (i.e. grandparents).
▷ Step-parents
▷ The son or daughter of a brother or a sister (i.e. nieces and nephews)
▷ The brother or sister of a father or a mother (i.e. aunts and uncles)
▷ In-laws; 152(d)(2)(G) lists son- and daughter-in-law; father- and mother-in-law;
and brother- and sister-in-law

9
Specified Relatives

▷ What does this mean? It means relatives such as cousins do not

count.
▷ Also any other dependent claimed as a qualifying relative but who
doesn’t meet these relationships doesn’t qualify a taxpayer for head
of household.
○ The taxpayer might be able to claim that person as a dependent, but they wouldn’t be
able to use that person for head of household.

10
Specified Relatives Example

▷ Billy’s best friend Adam lost his job during the pandemic and moved
in with Billy last year.
▷ This year, Adam lives with Billy all year. Adam doesn't have a job.
▷ Billy pays all the costs of maintaining the home. This year, he can
claim Adam as a dependent under the qualifying relative rules.
○ However, Billy cannot file as head of household because Adam is not a
specified relative.

11
 Another Example

▷ Billy and Millie are dating but not married. Millie has a two-year-old son from a
prior relationship. Billy is not this child’s father and has not legally adopted the
child.
▷ Everyone lives with Billy. Billy is the only one with income. He pays all the bills.
▷ Billy could claim both Millie and Millie’s child as dependents under the qualifying
relative rules.
○ But he couldn’t claim head of household filing status because neither Millie nor
Millie’s child are specified relatives.
■ BONUS: Billy couldn’t claim the child tax credit for Millie’s child, either, because he doesn’t
meet the relationship test. The child is a qualifying relative who only yields the other
dependents credit for Billy.

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Relatives

▷ Another thing to keep straight on this is, the dependent must live
with the taxpayer more than half the year (unless it’s the taxpayer’s
parent), in order for the taxpayer to file as head of household.
▷ This is true even though the taxpayer can claim the dependent
under the qualifying relative rules. Let’s look at an example on the
next slide.

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 Example

▷ Billy’s brother is unemployed this year and had no income. He lives

in his own apartment, but Billy is paying the brother’s rent and other
bills on the brother’s behalf.
▷ Under the qualifying relative test, there is no residency test for
specified relatives such as a brother. Meaning, if the brother has no
income and Billy is supporting him, Billy could claim the brother as a
dependent.
○ But because the brother doesn’t live with him, Billy could NOT file as head of
household.

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 Maintaining a Household

These expenses count for maintenance of a household:

▷ Property taxes
▷ Mortgage interest
▷ Rent
▷ Utilities
▷ Upkeep and repairs
▷ Property insurance
▷ Food consumed in the home
▷ Other household expenses – This term is not defined. However, the regulations mention
things that DO NOT COUNT include educational costs, medical expenses, transportation
and clothing. This means these “other” expenses would need to be directly related to the
house.

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Rule for Parents

▷ In one oddity of HOH filing status, a taxpayer’s parents do not need

to live with the taxpayer in order for the taxpayer to file as head of
household.
▷ The rule here is that the taxpayer must be able to claim the parent
as a dependent, and the taxpayer must pay more than 1/2 of the
cost of maintaining the parent’s home.

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 Example

▷ Angela provides more than half the support for her 80-year-old mother, whose
only income is social security.
▷ Mom lives in her own apartment, but Angela pays all of the rent and other costs
associated with the apartment.
▷ Since Angela’s mother meets the definition of a qualifying relative, Angela can
claim her as a dependent.
▷ And since parents don’t need to live in a taxpayer’s home in order to be used for
HOH purposes, Angela can use mom to file as HOH since she pays more than half
the cost of maintaining mom’s home, and she claims mom as a dependent.

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 Divorce and HOH

▷ A custodial parent may be able to file as head of household even if

they release the exemption claim for a child to the non-custodial
parent. (See earlier discussion.)
○ As long as the custodial parent meets the other rules relating to HOH status,
that parent can still file as HOH.
▷ Form 1040 asks taxpayers to list their dependents.
○ So, what if a custodial parent has released the dependency exemption to the
non-custodial parent, but is still filing as head of household?
■ They write the name of the dependent on the return. See next slide.

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Divorce and HOH

19
 Divorce and HOH

▷ Marge and Eric are divorced. Their child lives all year with Marge. She pays
more than half the cost of maintaining the house they live in.
▷ The divorce decree calls for Eric to claim the child this year, so Marge fills
out Form 8332 and gives the form to Eric, allowing Eric to claim the
dependency exemption and the child tax credit for the child.
▷ Marge can still claim all other benefits relating to the child, including HOH.
○ On her Form 1040, she’ll write the child’s name on the line near the top of the
form.

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Qualifying Surviving Spouse

1
 QSS

▷ Qualifying surviving spouse filing status, abbreviated as QSS, is a filing status available to
surviving spouses who have dependents in their home.
▷ The qualification rules for this filing status are, for the two years following the year of the
spouse’s death:
○ The surviving spouse must have been entitled to file a joint return with their spouse in the year
the spouse died (even if they filed separately)
○ The taxpayer has not remarried in this time period (if they have remarried, they’ll file either jointly
or separately with their new spouse)
○ They have a child or stepchild (but NOT a foster child or any other relationship, even if the
relationship is a qualifying child) that the taxpayer is claiming as a dependent — there are times
when a taxpayer can use a child for QSS status even if they don’t claim the exemption; see next
slide.
○ The child lived in the taxpayer’s home all year
○ The taxpayer pays more than half the cost of maintaining the home (same provisions as for HOH
status)

2
 QSS

Specific to the rule about claiming a child or stepchild, there are times
when a taxpayer doesn’t need to claim the child in order to qualify for
QSS status. Those times are:
▷ The child had gross income above the exemption threshold for
qualifying relatives ($5,200 for 2025), or
▷ The child filed a joint return, or
▷ The taxpayer could be claimed as a dependent on someone else’s
return and thus couldn’t claim dependents themselves

3
 QSS Example

▷ Mary and Gary are married. They have a son named Joey who is 10.
Gary dies in 2023. Mary does not remarry.
○ For 2023, she'll file a joint tax return with Gary; in 2024 and 2025, she can file
as qualifying surviving spouse (assuming Joey lives with her and she pays
more than half the cost of maintaining the home).
○ In 2026 and beyond, she'll file as head of household (again, assuming the son
continues to live with her and she meets the other requirements for HOH).

4
QSS Potholes

Unlike many other provisions we’ve talked about, where foster children
and various descendants qualify, that is not the case with QSS filing
status.
Examples of relationships that would not count for QSS:
▷ Foster children
▷ Grandchildren or any other relationship that is not a child or
adopted child
These relationships can still qualify as qualifying children, but would not
be a qualifier for QSS status.

5
 QSS Pothole Example

▷ Mary and Gary are married. In 2023 they take in a foster child named Jerry. Jerry
is legally placed with them by the courts and Mary and Gary claim Jerry under the
qualifying child rules.
▷ In late 2023, Gary unexpectedly dies. Jerry continues living with Mary in 2023 and
2024 as a foster child. Mary does not adopt Jerry.
▷ In 2023, Mary will file as married filing jointly with Gary.
▷ For 2024 and 2025, she will file as HOH (assuming she otherwise meets the
requirements).
○ While Jerry is a qualifying child, this relationship does not count for QSS purposes.

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QSS Benefits

▷ The main benefit of QSS filing status is the ability to continue using
MFJ tax rates, standard deduction, and (most of the time) adjusted
gross income (AGI) limits for various items.
▷ With AGI limits, read the instructions and IRS guidance carefully.
○ As one example: the QSS AGI thresholds for IRA contributions are the same
as MFJ, but for taxation of Social Security benefits, QSS uses the single-
person thresholds rather than MFJ thresholds.

7
Married Filing Separately

8
 Married Filing Separately

When taxpayers are married but choose to file separate tax returns, a practitioner needs to be
aware of special issues that arise. Not an exhaustive list, but some of the implications are:
▷ If one spouse itemizes, the other must itemize, even if the other spouse’s itemized
deductions are less than the standard deduction.
▷ A larger percentage of Social Security benefits are taxable (generally 85% taxable) unless
the taxpayers did not live together at all during the year.
▷ Credits for: earned income credit, adoption credit, child and dependent care expenses, and
education credits (American Opportunity Credit and Lifetime Learning Credit) are not
available.
▷ Passive activity losses generally cannot be taken.
▷ Strict AGI limits for traditional IRA and Roth IRA contributions.
▷ Capital losses limited to $1,500 (instead of the usual $3,000).
▷ No deduction for student loan interest.

9
Why Do MFS?

If MFS generally produces worse results (which it usually does), then why would
people use it? Could be for tax issues, or non-tax issues:
▷ Sometimes it just works out better for the bottom-line on the 1040, for reasons
that become complicated because “everyone’s situation is unique.”
▷ Taxpayers want to keep their income separate — either because they’re on the
rocks or because that’s just how they do things
▷ If one spouse has itemized deductions subject to AGI limits, it may sometimes be
better to file MFS.
Non-tax reason:
▷ Income-based repayment on student loans

10
 MFS: Changing to MFJ

▷ Generally, the rule is: a taxpayer can change from MFS to MFJ on an
amended return, but NOT from MFJ to MFS.
▷ A change from MFJ to MFS is only allowed if the new return is filed
before the due date of the return
○ Note the terminology your presenter uses here – the “new” return, not the
“amended” return. Why this terminology?
○ Because such a return is called a “superseding” return, and if filed before April
15th, the superseding return would take the place of the first return filed. It is
NOT an amendment but “the tax return” of the taxpayer.
○ If an extension is filed, you could do a superseding return up through the
extended due date of the return

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The End!

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