Question: Sandy, the custodian of her 12-year-old granddaughter Sharon, passed away in May 2024. After Sandy’s death, Sharon moved in with her aunt. If Sandy had not passed away, she would have been eligible to claim the earned income credit (EIC) with Sharon as her qualifying child, assuming all other EIC requirements were met. Who is eligible to claim EIC with Sharon as a qualifying child: Sandy on her final return, or Sharon’s aunt?
Answer: Either Sandy (on her final return) or Sharon’s aunt could claim EIC with Sharon as a qualifying child if all other EIC requirements are met. A key requirement for a qualifying child is that the child must live with the taxpayer for more than half the year (§ 32(c)(3)).
When Sandy passed away in May 2024, her tax year became a short tax year (January to May), meaning Sharon lived with Sandy for her entire tax year. As a result, Sharon qualifies as a qualifying child for EIC on Sandy’s final return. If Sharon subsequently moved in with her aunt, she could potentially claim EIC for Sharon, assuming all other requirements are met.
However, only one taxpayer can claim EIC with Sharon as a qualifying child. If Sandy’s personal representative and Sharon’s aunt cannot agree on who will claim Sharon, the IRS tie-breaker rules will apply (§ 32(c)(1)(A)). The tie-breaker rules prioritize parents; since Sharon did not live with either parent during the tax year, both would be ineligible to claim Sharon as a qualifying child. Sharon lived with both her grandmother and aunt for more than half of their respective tax years, so the custodian with the higher adjusted gross income (AGI) will be entitled to claim EIC (§ 32(c)(1)(B)). The fact that Sandy passed away does not prevent her personal representative from claiming EIC for her on Sandy’s final return if all other requirements are satisfied (§32).
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.