Dependent Question

[jainen]

>>her boyfriend clearly provides over 50 percent of expense<<

It may be clear to you, but in my opinion you have not looked closely enough. First of all, although Pub 501 says welfare is considered support not paid by the dependent, Head of Household uses different definitions. For example, support uses fair rental value while HoH uses actual costs, which might well be half covered by $7000 in a favorable arrangement. You give no details at all about the boyfriend's contribution, but as long as we are making assumptions let's guess that she documented a LACK of support when she filed for that welfare.

[Tax Prep by Deb]

A point well made. Boyfriend earns well ov 40,000.00 per year, has no savings, but uses his money mostly for the support of girlfriend and children. Even my client and her boyfriend will conceed that he provides over 1/2 of the support for the total household. I'm quite sure as you stated that she documented a lack of support when she filed for welfare, but that's between her and the state. This is why I'm being very cautious on the dependent situation as I am afraid it will send all kinds of flags.

Deb!

[SaraEA]

Someone who makes $7k a year doesn't need HOH filing status. Her standard deduction and personal exemption alone bring her taxable income to zero, so adding dependents or HOH doesn't help. She does need to claim the kids, however, for the additional child tax credit. They meet the tests for qualifying children, so go for it.

It's hard for those of us who learned taxes using the old rules about support to unlearn them. Now the child can't have provided more than half of his or her own support to be a dependent. For HOH, however, the taxpayer must still provide more than half the cost of the home, and state support is not considered to come from the taxpayer. So no HOH (not needed anyway), but claim 3 dependent children for ACTC and EITC.

The alternative is for the boyfriend to claim the three dependents, provided they lived with him all year. He can't be HOH or get EITC, but he can qualify for the CTC and ACTC. See which way works best.