Determining qualifying dependents and the tax implications

Claiming a qualifying child or a qualifying relative as a dependent can often have significant tax benefits for a taxpayer. For most individual taxpayers, determining who qualifies as a dependent of a taxpayer is a straightforward proposition. However, the question can quickly get complicated in a number of situations tax pros see regularly.

Below, you’ll find a few of the top questions from the webinar and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.  

Q: Are nephews and nieces allowed to be claimed as dependents?
A: Yes, they are descendants of the taxpayer’s sibling.

Q: Are the terms custodial and non-custodial parent only relevant to divorced parents?
A: No, these terms apply to unmarried parents and divorced parents who do not live in the same household.

Q: Do you need to complete Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, if one parent has more income than the other parent?
A: No, the Form 8332 is used by the custodial parent to sign over the dependency to the noncustodial parent. It has nothing to do with adjusted gross income (AGI).

Q: We have clients who have joint custody and a legal settlement stating they each have the child an equal number of days. They alternate every other week. The parents could not say which one had the child more nights.
A: When there are 365 days in the year, one parent has to have the child more nights than the other parent. If they each claim they have the child an equal number of nights for the year, then neither parent can claim the child.

To learn more about tax reporting for qualifying dependents, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.