What's New for 2007
Who must file. Generally, the amount of income you can receive before you must file a tax return has increased. Table 1 shows the filing requirements for most taxpayers.
Exemption amount. The amount you can deduct for each exemption has increased from $3,300 in 2006 to $3,400 in 2007.
Exemption phaseout. You lose part of the benefit of your exemptions if your adjusted gross income is above a certain amount. For 2007, the phaseout begins at $117,300 for married persons filing separately; $156,400 for single individuals; $195,500 for heads of household; and $234,600 for married persons filing jointly or qualifying widow(ers). However, in 2007, you can lose no more than ⅔ of the amount of your exemptions. In other words, each exemption cannot be reduced to less than $1,133.
Standard deduction. The standard deduction for most taxpayers who do not itemize their deductions on Schedule A of Form 1040 is higher in 2007 than it was in 2006. The amount depends on your filing status. The 2007 Standard Deduction Tables shown near the end of this publication as Tables 7, 8, and 9 can help you figure the amount of your deduction.
Itemized deductions. Some of your itemized deductions may be limited if your adjusted gross income is more than $156,400 ($78,200 if you are married filing separately). However, in 2007, the amount by which these deductions are reduced is only ⅔ of the amount of the reduction that otherwise would have applied. See Who Should Itemize, later.
Exemption for housing person displaced by Hurricane Katrina expires. The $500 exemption for housing an individual displaced by Hurricane Katrina, which was allowed for 2005 and 2006, is no longer allowed.
Qualifying relative. You may be able to claim an exemption for a child whose parent is not required to file a tax return. See Not a Qualifying Child Test.
Reminders
Taxpayer identification number for aliens. If you are a nonresident or resident alien and you do not have and are not eligible to get a social security number (SSN), you must apply for an individual taxpayer identification number (ITIN). Your spouse also may need an ITIN if he or she does not have and is not eligible to get an SSN. See Form W-7, Application for IRS Individual Taxpayer Identification Number. Also, see Social Security Numbers for Dependents, later.
Introduction
This publication discusses some tax rules that affect every person who may have to file a federal income tax return. It answers some basic questions: who must file; who should file; what filing status to use; how many exemptions to claim; and the amount of the standard deduction.
Who Must File explains who must file an income tax return. If you have little or no gross income, reading this section will help you decide if you have to file a return.
Table 1. 2007 Filing Requirements Chart for Most Taxpayers
| IF your filing status is... | AND at the end of 2007 you were... * | THEN file a return if your gross income was at least... ** |
| single | under 65 | $8,750 |
| 65 or older | $10,050 | |
| head of household | under 65 | $11,250 |
| 65 or older | $12,550 | |
| married, filing jointly *** | under 65 (both spouses) | $17,500 |
| 65 or older (one spouse) | $18,550 | |
| 65 or older (both spouses) | $19,600 | |
| married, filing separately | any age | $3,400 |
| qualifying widow(er) with dependent child | under 65 | $14,100 |
| 65 or older | $15,150 |
| * If you were born before January 2, 1943, you are considered to be 65 or older at the end of 2007. |
| ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you may exclude part or all of it). Do not include social security benefits unless you are married filing a separate return and you lived with your spouse at any time during 2007. |
| *** If you did not live with your spouse at the end of 2007 (or on the date your spouse died) and your gross income was at least $3,400, you must file a return regardless of your age. |
Who Should File will help you decide if you should file a return, even if you are not required to do so.
Filing Status helps you determine which filing status to use. Filing status is important in determining whether you must file a return, your standard deduction, and your tax rate. It also helps determine what credits you may be entitled to.
Exemptions, which reduce your taxable income, are discussed in Exemptions.
Exemptions for Dependents explains the difference between a qualifying child and a qualifying relative. Other topics include the social security number requirement for dependents, the rules for multiple support agreements, and the rules for divorced or separated parents.
Standard Deduction gives the rules and dollar amounts for the standard deduction — a benefit for taxpayers who do not itemize their deductions. This section also discusses the standard deduction for taxpayers who are blind or age 65 or older, and special rules for dependents. In addition, this section should help you decide whether you would be better off taking the standard deduction or itemizing your deductions.
How To Get Tax Help explains how to get tax help from the IRS.
This publication is for U.S. citizens and resident aliens only. If you are a resident alien for the entire year, you must follow the same tax rules that apply to U.S. citizens. The rules to determine if you are a resident or nonresident alien are discussed in chapter 1 of Publication 519, U.S. Tax Guide for Aliens.
Nonresident aliens
If you were a nonresident alien at any time during the year, the rules and tax forms that apply to you may be different from those that apply to U.S. citizens. See Publication 519.
Useful Items - You may want to see:
Publication
Form (and Instructions)
- 1040X
Amended U.S. Individual Income Tax Return - 2848
Power of Attorney and Declaration of Representative - 8332
Release of Claim to Exemption for Child of Divorced or Separated Parents - 8814
Parents' Election To Report Child's Interest and Dividends
Who Must File
If you are a U.S. citizen or resident alien, whether you must file a federal income tax return depends upon your gross income, your filing status, your age, and whether you are a dependent. For details, see Table 1 and Table 2. You also must file if one of the situations described in Table 3 applies. The filing requirements apply even if you owe no tax.
You may have to pay a penalty if you are required to file a return but fail to do so. If you willfully fail to file a return, you may be subject to criminal prosecution.
For information on what form to use — Form 1040EZ, Form 1040A, or Form 1040 — see the instructions in your tax package.
Gross income
Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from tax. If you are married and live with your spouse in a community property state, half of any income defined by state law as community income may be considered yours. For a list of community property states, see Community property states under Married Filing Separately, later. Self-employed persons. If you are self-employed in a business that provides services (where products are not a factor), your gross income from that business is the gross receipts. If you are self-employed in a business involving manufacturing, merchandising, or mining, your gross income from that business is the total sales minus the cost of goods sold. To this figure, you add any income from investments and from incidental or outside operations or sources. You must file Form 1040 if you owe any self-employment tax.
Filing status
Your filing status generally depends on whether you are single or married. In some cases, it depends on other factors as well. Whether you are single or married is determined as of the last day of your tax year, which is December 31 for most taxpayers. Filing status is discussed in detail later in this publication.
Age
Age is a factor in determining if you must file a return only if you are 65 or older at the end of your tax year. For 2007, you are 65 or older if you were born before January 2, 1943.
Filing Requirements for Most Taxpayers
You must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1. Dependents should see Table 2 instead.
Deceased Persons
You must file an income tax return for a decedent (a person who died) if both of the following are true.
- You are the surviving spouse, executor, administrator, or legal representative.
- The decedent met the filing requirements described in this publication at the time of his or her death.
For more information, see Final Return for Decedent in Publication 559.
Table 2. 2007 Filing Requirements for Dependents
See Exemptions for Dependents to find out if you are a dependent.
| If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. | |
| In this table, unearned income includes taxable interest, ordinary dividends, and capital gain distributions. Earned income includes wages, tips, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income. | |
| Caution. If your gross income was $3,400 or more, you usually cannot be claimed as a dependent unless you are a qualifying child. For details, see Exemptions for Dependents. | |
| Single dependents— Were you either age 65 or older or blind? | |
| □ | No. You must file a return if any of the following apply.
|
| □ | Yes. You must file a return if any of the following apply.
|
| Married dependents—Were you either age 65 or older or blind? | |
| □ | No. You must file a return if any of the following apply.
|
| □ | Yes. You must file a return if any of the following apply.
|
U.S. Citizens or Resident Aliens Living Abroad
For purposes of determining whether you must file a return, you must include in your gross income all of the income you earned or received abroad, including any income you can exclude under the foreign earned income exclusion. For more information on special tax rules that may apply to you, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Residents of Puerto Rico
Generally, if you are a U.S. citizen and a bona fide resident of Puerto Rico, you must file a U.S. income tax return if you meet the income requirements. This is in addition to any legal requirement you may have to file an income tax return with Puerto Rico.
If you are a bona fide resident of Puerto Rico for the whole year, your U.S. gross income does not include income from sources within Puerto Rico. However, include in your U.S. gross income any income you received for your services as an employee of the United States or any U.S. agency. If you receive income from Puerto Rican sources that is not subject to U.S. tax, you must reduce your standard deduction, which reduces the amount of income you can have before you must file a U.S. income tax return.
For more information, see Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.
Individuals With Income From U.S. Possessions
If you had income from Guam, the Commonwealth of Northern Mariana Islands, American Samoa, or the U.S. Virgin Islands, special rules may apply when determining whether you must file a U.S. federal income tax return. In addition, you may have to file a return with the individual possession government. See Publication 570 for more information.
Dependents
A person who is a dependent may still have to file a return. This depends on the amount of the dependent's earned income, unearned income, and gross income. For details, see Table 2. A dependent may also have to file if one of the situations described in Table 3 applies.
Responsibility of parent
If a dependent child who must file an income tax return cannot file it for any reason, such as age, a parent, guardian, or other legally responsible person must file it for the child. If the child cannot sign the return, the parent or guardian must sign the child's name followed by the words “By (your signature), parent for minor child.”
Earned income
This is salaries, wages, professional fees, and other amounts received as pay for work you actually perform. Earned income (only for purposes of filing requirements and the standard deduction) also includes any part of a scholarship that you must include in your gross income. See chapter 1 of Publication 970, Tax Benefits for Education, for more information on taxable and nontaxable scholarships. Child's earnings. Amounts a child earns by performing services are his or her gross income. This is true even if under local law the child's parents have the right to the earnings and may actually have received them. If the child does not pay the tax due on this income, the parent is liable for the tax.
Unearned income
This is income such as interest, dividends, and capital gains. Trust distributions of interest, dividends, capital gains, and survivor annuities are considered unearned income also. Election to report child's unearned income on parent's return. You may be able to include your child's interest and dividend income on your tax return. If you choose to do this, your child will not have to file a return. However, all of the following conditions must be met.
- Your child was under age 18 at the end of 2007. (A child born on January 1, 1990, is considered to be age 18 at the end of 2007; you cannot make the election for this child.)
- Your child had gross income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).
- The interest and dividend income was less than $8,500.
- Your child is required to file a return for 2007 unless you make this election.
- Your child does not file a joint return for 2007.
- No estimated tax payment was made for 2007 and no 2006 overpayment was applied to 2007 under your child's name and social security number.
- No federal income tax was withheld from your child's income under the backup withholding rules.
- You are the parent whose return must be used when making the election to report your child's unearned income.
Other Situations
You may have to file a tax return even if your gross income is less than the amount shown in Table 1 or Table 2 for your filing status. See Table 3 for those other situations when you must file.
Table 3. Other Situations When You Must File a 2007 Return
| If any of the four conditions listed below applied to you for 2007, you must file a return. | ||
| 1. | You owe any special taxes, including any of the following. | |
| a. | Alternative minimum tax. (See the Form 1040 instructions for line 45.) | |
| b. | Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. (See Publication 590, Individual Retirement Arrangements (IRAs), and Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.) But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. | |
| c. | Social security or Medicare tax on tips you did not report to your employer (see Publication 531, Reporting Tip Income) or on wages you received from an employer who did not withhold these taxes (see Form 8919). | |
| d. | Write-in taxes, including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings account distributions. (See Publication 531, Publication 969, and the Form 1040 instructions for line 63.) | |
| e. | Household employment taxes. But if you are filing a return only because you owe these taxes, you can file Schedule H by itself. | |
| f. | Recapture taxes. (See the Form 1040 instructions for lines 44 and 63.) | |
| g. | Additional tax on a health savings account from From 8889, Part III. | |
| 2. | You received any advance earned income credit (EIC) payments from your employer. These payments should be shown in box 9 of your Form W-2. (See Publication 596, Earned Income Credit.) | |
| 3. | You had net earnings from self-employment of at least $400. (See Schedule SE (Form 1040) and its instructions.) | |
| 4. | You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. (See Schedule SE (Form 1040) and its instructions.) | |
Who Should File
Even if you do not have to file, you should file a tax return if you can get money back. For example, you should file if one of the following applies.
- You had income tax withheld from your pay.
- You made estimated tax payments for the year or had any of your overpayment for last year applied to this year's estimated tax.
- You qualify for the earned income credit. See Publication 596, Earned Income Credit (EIC), for more information.
- You qualify for the additional child tax credit. See the instructions in your tax forms package for more information on this credit.
- You qualify for the health coverage tax credit. For information about this credit, see Form 8885, Health Coverage Tax Credit.
- You qualify for the refundable credit for prior year minimum tax. See Form 8801, Credit for Prior Year Minimum Tax — Individuals, Estates, and Trusts.
Filing Status
You must determine your filing status before you can determine your filing requirements, standard deduction (discussed later), and correct tax. You figure your correct tax by using the section of the Tax Computation Worksheet or the column in the Tax Table that applies to your filing status.
You also use your filing status in determining whether you are eligible to claim certain other deductions and credits.
There are five filing statuses:
- Single,
- Married Filing Jointly,
- Married Filing Separately,
- Head of Household, and
- Qualifying Widow(er) With Dependent Child.
If more than one filing status applies to you, choose the one that will give you the lowest tax.
Marital Status
In general, your filing status depends on whether you are considered unmarried or married. For federal tax purposes, a marriage means only a legal union between a man and a woman as husband and wife.
Unmarried persons
You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree. State law governs whether you are married or legally separated under a divorce or separate maintenance decree.
Divorced persons
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year.
Divorce and remarriage
If you obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intended to and did remarry each other in the next tax year, you and your spouse must file as married individuals.
Annulled marriages
If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint returns for earlier years. You must file amended returns (Form 1040X) claiming single or head of household status for all tax years affected by the annulment that are not closed by the statute of limitations for filing a tax return. The statute of limitations generally does not expire until 3 years after your original return was filed. Head of household or qualifying widow(er) with dependent child. If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child. See Head of Household and Qualifying Widow(er) With Dependent Child to see if you qualify.
Married persons
If you are considered married for the whole year, you and your spouse can file a joint return, or you can file separate returns.
Considered married
You are considered married for the whole year if on the last day of your tax year you and your spouse meet any one of the following tests.
- You are married and living together as husband and wife.
- You are living together in a common law marriage that is recognized in the state where you now live or in the state where the common law marriage began.
- You are married and living apart, but not legally separated under a decree of divorce or separate maintenance.
- You are separated under an interlocutory (not final) decree of divorce. For purposes of filing a joint return, you are not considered divorced.
Spouse died during the year
If your spouse died during the year, you are considered married for the whole year for filing status purposes. If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child. If you remarried before the end of the tax year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year.
Married persons living apart
If you live apart from your spouse and meet certain tests, you may be considered unmarried. If this applies to you, you can file as head of household even though you are not divorced or legally separated. If you qualify to file as head of household instead of as married filing separately, your standard deduction will be higher. Also, your tax may be lower, and you may be able to claim the earned income credit. See Head of Household, later.
Single
Your filing status is single if, on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree, and you do not qualify for another filing status. To determine your marital status on the last day of the year, see Marital Status, earlier.
Widow(er). Your filing status may be single if you were widowed before January 1, 2007, and did not remarry before the end of 2007. However, you might be able to use another filing status that will give you a lower tax. See Head of Household and Qualifying Widow(er) With Dependent Child, later, to see if you qualify.How to file
You can file Form 1040EZ (if you have no dependents, are under 65 and not blind, and meet other requirements), Form 1040A, or Form 1040. If you file Form 1040A or Form 1040, show your filing status as single by checking the box on line 1. Use the Single column of the Tax Table, or Section A of the Tax Computation Worksheet, to figure your tax.
Married Filing Jointly
You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.
If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.
If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). You can choose the method that gives the two of you the lower combined tax.How to file
If you file as married filing jointly, you can use Form 1040 or Form 1040A. If you have no dependents, are under 65 and not blind, and meet other requirements, you can file Form 1040EZ. If you file Form 1040 or Form 1040A, show this filing status by checking the box on line 2. Use the Married filing jointly column of the Tax Table, or Section B of the Tax Computation Worksheet, to figure your tax.
Spouse died during the year
If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status. See Spouse died during the year, under Married persons, earlier.
Divorced persons
If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married filing jointly as your filing status.
Filing a Joint Return
Both you and your spouse must include all of your income, exemptions, and deductions on your joint return.
Accounting period
Both of you must use the same accounting period, but you can use different accounting methods.
Joint responsibility
Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.
Divorced taxpayer
You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. This responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.
Relief from joint responsibility
In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse which were incorrectly reported on the joint return. You can ask for relief no matter how small the liability. There are four types of relief available.
- Innocent spouse relief.
- Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed.
- Equitable relief.
- Relief from liability arising from community property law.
Signing a joint return
For a return to be considered a joint return, both husband and wife generally must sign the return.
Spouse died before signing
If your spouse died before signing the return, the executor or administrator must sign the return for your spouse. If neither you nor anyone else has yet been appointed as executor or administrator, you can sign the return for your spouse and enter “Filing as surviving spouse” in the area where you sign the return.
Spouse away from home
If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so that it can be filed on time.
Injury or disease prevents signing
If your spouse cannot sign because of injury or disease and tells you to sign, you can sign your spouse's name in the proper space on the return followed by the words “By (your name), Husband (or Wife).” Be sure to also sign in the space provided for your signature. Attach a dated statement, signed by you, to the return. The statement should include the form number of the return you are filing, the tax year, the reason your spouse cannot sign, and that your spouse has agreed to your signing for him or her.
Signing as guardian of spouse
If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian.
Spouse in combat zone
If your spouse is unable to sign the return because he or she is serving in a combat zone (such as the Persian Gulf area, Yugoslavia, or Afghanistan), or a qualified hazardous duty area (Bosnia and Herzegovina, Croatia, or Macedonia), and you do not have a power of attorney or other statement, you can sign for your spouse. Attach a signed statement to your return that explains that your spouse is serving in a combat zone. For more information on special tax rules for persons who are serving in a combat zone, or who are in missing status as a result of serving in a combat zone, see Publication 3, Armed Forces' Tax Guide.
Other reasons spouse cannot sign
If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a valid power of attorney (a legal document giving you permission to act for your spouse). Attach the power of attorney (or a copy of it) to your tax return. You can use Form 2848. Nonresident alien or dual-status alien. A joint return generally cannot be filed if either spouse is a nonresident alien at any time during the tax year. However, if one spouse was a nonresident alien or dual-status alien who was married to a U.S. citizen or resident alien at the end of the year, the spouses can choose to file a joint return. If you do file a joint return, you and your spouse are both treated as U.S. residents for the entire tax year. See chapter 1 of Publication 519.
Married Filing Separately
You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.
If you and your spouse do not agree to file a joint return, you have to use this filing status unless you qualify for head of household status, discussed next.
You may be able to choose head of household filing status if you live apart from your spouse, meet certain tests, and are considered unmarried (explained later, under Head of Household). This can apply to you even if you are not divorced or legally separated. If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions. See Head of Household, later, for more information.
Unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns). This way you can make sure you are using the filing status that results in the lowest combined tax. However, you will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules , later.How to file
If you file a separate return, you generally report only your own income, exemptions, credits, and deductions on your individual return. You can claim an exemption for your spouse if your spouse had no gross income and was not the dependent of another person. However, if your spouse had any gross income or was the dependent of someone else, you cannot claim an exemption for him or her on your separate return. If you file as married filing separately, you can use Form 1040A or Form 1040. Select this filing status by checking the box on line 3 of either form. You also must enter your spouse's full name in the space provided and must enter your spouse's SSN or ITIN in the space provided unless your spouse does not have and is not required to have an SSN or ITIN. Use the Married filing separately column of the Tax Table or Section C of the Tax Computation Worksheet to figure your tax.
Special Rules
If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.
- Your tax rate generally will be higher than it would be on a joint return.
- Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
- You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return).
- You cannot take the earned income credit.
- You cannot take the exclusion or credit for adoption expenses in most cases.
- You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
- You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.
- If you lived with your spouse at any time during the tax year:
- You cannot claim the credit for the elderly or the disabled.
- You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and
- You cannot roll over amounts from a traditional IRA into a Roth IRA.
- The following credits and deductions are reduced at income levels that are half of those for a joint return:
- The child tax credit,
- The retirement savings contributions credit,
- Itemized deductions, and
- The deduction for personal exemptions.
- Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
- If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.
Rental activity losses
If you actively participated in a passive rental real estate activity that produced a loss, you generally can deduct the loss from your nonpassive income up to $25,000. This is called a special allowance. However, married persons filing separate returns who lived together at any time during the year cannot claim this special allowance. Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum special allowance for losses from passive real estate activities. See Rental Activities in Publication 925, Passive Activity and At-Risk Rules.
Community property states
If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555, Community Property.
Joint Return After Separate Returns
You can change your filing status by filing an amended return using Form 1040X.
If you or your spouse (or both of you) file a separate return, you generally can change to a joint return any time within 3 years from the due date of the separate return or returns. This does not include any extensions. A separate return includes a return filed by you or your spouse claiming married filing separately, single, or head of household filing status.
Separate Returns After Joint Return
Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return.
Exception
A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. The personal representative has 1 year from the due date (including extensions) of the return to make the change. See Publication 559 for more information on filing income tax returns for a decedent.
Head of Household
You may be able to file as head of household if you meet all the following requirements.
- You are unmarried or “considered unmarried” on the last day of the year.
- You paid more than half the cost of keeping up a home for the year.
- A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying Person.
How to file
If you file as head of household, you can use either Form 1040A or Form 1040. Indicate your choice of this filing status by checking the box on line 4 of either form. Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax.
Considered Unmarried
To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. You are considered unmarried on the last day of the tax year if you meet all the following tests.
- You file a separate return (defined earlier under Joint Return After Separate Returns).
- You paid more than half the cost of keeping up your home for the tax year.
- Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences, later.
- Your home was the main home of your child, stepchild, or foster child for more than half the year. (See Home of qualifying person, later, for rules applying to a child's birth, death, or temporary absence during the year.)
- You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described later in Children of divorced or separated parents under Qualifying Child or in Support Test for Children of Divorced or Separated Parents under Qualifying Relative. The general rules for claiming an exemption for a dependent are explained later under Exemptions for Dependents.
Nonresident alien spouse
You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household.
Earned income credit
Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you are still considered married for purposes of the earned income credit (unless you meet the five tests listed earlier under Considered Unmarried). You are not entitled to the credit unless you file a joint return with your spouse and meet other qualifications. See Publication 596 for more information.
Choice to treat spouse as resident
You are considered married if you choose to treat your spouse as a resident alien. See chapter 1 of Publication 519.
Keeping Up a Home
To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. You can determine whether you paid more than half of the cost of keeping up a home by using the following worksheet.
Cost of Keeping Up a Home
| Amount You Paid | Total Cost | |
| Property taxes | $ | $ |
| Mortgage interest expense | ||
| Rent | ||
| Utility charges | ||
| Upkeep and repairs | ||
| Property insurance | ||
| Food consumed on the premises | ||
| Other household expenses | ||
| Totals | $ | $ |
| Minus total amount you paid | ( ) | |
| Amount others paid | $ | |
| If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home. | ||
Costs you include
Include in the cost of upkeep expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. However, you must include them in the total cost of keeping up your home to figure if you paid over half the cost.
Costs you do not include
Do not include in the cost of upkeep expenses such as clothing, education, medical treatment, vacations, life insurance, or transportation. Also, do not include the rental value of a home you own or the value of your services or those of a member of your household.
Qualifying Person
See Table 4 to see who is a qualifying person.
Any person not described in Table 4 is not a qualifying person.
Example —
Your unmarried son lived with you all year and was 18 years old at the end of the year. He did not provide more than half of his own support and does not meet the tests to be a qualifying child of anyone else. As a result, he is your qualifying child (see Qualifying Child, later) and, because he is single, is a qualifying person for you to claim head of household filing status.
Example —
The facts are the same as in Example 1 except your son was 25 years old at the end of the year and his gross income was $5,000. Because he does not meet the age test (explained later under Qualifying Child), your son is not your qualifying child. Because he does not meet the gross income test (explained later under Qualifying Relative), he is not your qualifying relative. As a result, he is not your qualifying person for head of household purposes.
Example —
Your girlfriend lived with you all year. Even though she may be your qualifying relative if the gross income and support tests (explained later) are met, she is not your qualifying person for head of household purposes. See Table 4.
Example —
The facts are the same as in Example 3 except your girlfriend's 10-year-old son also lived with you all year. He is not your qualifying child and, because he is your girlfriend's qualifying child, he is not your qualifying relative (see Not a Qualifying Child Test, later). As a result, he is not your qualifying person for head of household purposes.
Home of qualifying person
Generally, the qualifying person must live with you for more than half of the year.
Special rule for parent
If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. However, you must be able to claim an exemption for your father or mother. Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly.
Death or birth
You may be eligible to file as head of household if the individual who qualifies you for this filing status is born or dies during the year. You must have provided more than half of the cost of keeping up a home that was the individual's main home for more than half of the year, or, if less, the period during which the individual lived.
Example —
You are unmarried. Your mother, for whom you can claim an exemption, lived in an apartment by herself. She died on September 2. The cost of the upkeep of her apartment for the year until her death was $6,000. You paid $4,000 and your brother paid $2,000. Your brother made no other payments towards your mother's support. Your mother had no income. Because you paid more than half of the cost of keeping up your mother's apartment from January 1 until her death, and you can claim an exemption for her, you can file as a head of household.
Temporary absences
You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. It must be reasonable to assume that the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence.
Kidnapped child
You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. You can claim head of household filing status if all the following statements are true.
- The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
- In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.
- You would have qualified for head of household filing status if the child had not been kidnapped.
- The year there is a determination that the child is dead, or
- The year the child would have reached age 18.
Qualifying Widow(er) With Dependent Child
If your spouse died in 2007, you can use married filing jointly as your filing status for 2007 if you otherwise qualify to use that status. The year of death is the last year for which you can file jointly with your deceased spouse. See Married Filing Jointly, earlier.
You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year your spouse died. For example, if your spouse died in 2006 and you have not remarried, you may be able to use this filing status for 2007 and 2008. The rules for using this filing status are explained in detail here.
This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). This status does not entitle you to file a joint return.
How to file
If you file as a qualifying widow(er) with dependent child, you can use either Form 1040A or Form 1040. Indicate your filing status by checking the box on line 5 of either form. Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax.
Table 4. Who Is a Qualifying Person Qualifying You To File as Head of Household? 1
Caution. See the text of this publication for the other requirements you must meet to claim head of household filing status.
| IF the person is your . . . | AND . . . | THEN that person is . . . |
| qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) 2 | he or she is single | a qualifying person, whether or not you can claim an exemption for the person. |
| he or she is married and you can claim an exemption for him or her | a qualifying person. | |
| he or she is married and you cannot claim an exemption for him or her | not a qualifying person. 3 | |
| qualifying relative 4 who is your father or mother | you can claim an exemption for him or her 5 | a qualifying person. 6 |
| you cannot claim an exemption for him or her | not a qualifying person. | |
| qualifying relative 4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests). | he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you on page 14, and you can claim an exemption for him or her 5 | a qualifying person. |
| he or she did not live with you more than half the year | not a qualifying person. | |
| he or she is not related to you in one of the ways listed under Relatives who do not have to live with you on page 14 and is your qualifying relative only because he or she lived with you all year as a member of your household | not a qualifying person | |
| you cannot claim an exemption for him or her | not a qualifying person. |
| 1A person cannot qualify more than one taxpayer to use the head of household filing status for the year. | ||
| 2The term “qualifying child” is defined under Exemptions for Dependents, later. Note: If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of divorced or separated parents under Qualifying Child, later. If you are the custodial parent and those rules apply, the child generally is your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. | ||
| 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. | ||
| 4The term “qualifying relative” is defined under Exemptions for Dependents, later. | ||
| 5If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Multiple Support Agreement. | ||
| 6See Special rule for parent for an additional requirement. | ||
Eligibility rules
You are eligible to file your 2007 return as a qualifying widow(er) with dependent child if you meet all the following tests.
- You were entitled to file a joint return with your spouse for the year your spouse died. It does not matter whether you actually filed a joint return.
- Your spouse died in 2005 or 2006 and you did not remarry before the end of 2007.
- You have a child or stepchild for whom you can claim an exemption. This does not include a foster child.
- This child lived in your home all year, except for temporary absences. See Temporary absences, earlier, under Head of Household. There are also exceptions, described later, for a child who was born or died during the year and for a kidnapped child.
- You paid more than half the cost of keeping up a home for the year. See Keeping Up a Home, earlier, under Head of Household.
Example —
John Reed's wife died in 2005. John has not remarried. He has continued during 2006 and 2007 to keep up a home for himself and his child, who lives with him and for whom he can claim an exemption. For 2005 he was entitled to file a joint return for himself and his deceased wife. For 2006 and 2007, he can file as a qualifying widower with a dependent child. After 2007, he can file as head of household if he qualifies.
Death or birth
You may be eligible to file as a qualifying widow(er) with dependent child if the child who qualifies you for this filing status is born or dies during the year. You must have provided more than half of the cost of keeping up a home that was the child's main home during the entire part of the year he or she was alive.
Kidnapped child
You may be eligible to file as a qualifying widow(er) with dependent child, even if the child who qualifies you for this filing status has been kidnapped. You can claim qualifying widow(er) with dependent child filing status if all the following statements are true.
- The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
- In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.
- You would have qualified for qualifying widow(er) with dependent child filing status if the child had not been kidnapped.
Exemptions
Exemptions reduce your taxable income. Generally, you can deduct $3,400 for each exemption you claim in 2007. If you are entitled to two exemptions for 2007, you would deduct $6,800 ($3,400 × 2). But you may lose part of the dollar amount of your exemptions if your adjusted gross income is above a certain amount. See Phaseout of Exemptions, later.
You usually can claim exemptions for yourself, your spouse, and each person you can claim as a dependent.
Types of exemptions
There are two types of exemptions: personal exemptions and exemptions for dependents. While each is worth the same amount ($3,400 for 2007), different rules, discussed later, apply to each type.
Who cannot claim a personal exemption
If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim a personal exemption on his or her own tax return.
How to claim exemptions
How you claim an exemption on your tax return depends on which form you file.
Form 1040EZ filers
If you file Form 1040EZ, the exemption amount is combined with the standard deduction and entered on line 5.
Form 1040A filers
If you file Form 1040A, complete lines 6a through 6d. The total number of exemptions you can claim is the total in the box on line 6d. Also complete line 26.
Form 1040 filers
If you file Form 1040, complete lines 6a through 6d. Also complete line 42. U.S. citizen or resident alien. If you are a U.S. citizen, U.S. resident alien, U.S. national (defined later) or a resident of Canada or Mexico, you may qualify for any of the exemptions discussed here.
Nonresident aliens
Generally, if you are a nonresident alien (other than a resident of Canada or Mexico, or certain residents of India or Korea), you can qualify for only one personal exemption for yourself. You cannot claim exemptions for a spouse or dependents. These restrictions do not apply if you are a nonresident alien married to a U. S. citizen or resident alien and have chosen to be treated as a resident of the United States.
More information
For more information on exemptions if you are a nonresident alien, see chapter 5 in Publication 519. Dual-status taxpayers. If you have been both a nonresident alien and a resident alien in the same tax year, you should see Publication 519 for information on determining your exemptions.
Personal Exemptions
You are generally allowed one exemption for yourself and, if you are married, one exemption for your spouse. These are called personal exemptions.
Your Own Exemption
You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent.
Your Spouse's Exemption
Your spouse is never considered your dependent.
Joint return
On a joint return, you can claim one exemption for yourself and one for your spouse.
Separate return
If you file a separate return, you can claim the exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your spouse as a dependent. This is also true if your spouse is a nonresident alien.
Head of household
If you qualify for head of household filing status because you are considered unmarried, you can claim an exemption for your spouse if the conditions described in the preceding paragraph are satisfied. To claim the exemption for your spouse, check the box on line 6b of Form 1040 or Form 1040A and enter the name of your spouse in the space to the right of the box. Enter the SSN or ITIN of your spouse in the space provided at the top of Form 1040 or Form 1040A.
Death of spouse
If your spouse died during the year, you generally can claim your spouse's exemption under the rules just explained in Joint return. If you file a separate return for the year, you may be able to claim your spouse's exemption under the rules just described in Separate return. If you remarried during the year, you cannot take an exemption for your deceased spouse. If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed as an exemption on both the final separate return of your deceased spouse and the separate return of your new spouse for that year. If you file a joint return with your new spouse, you can be claimed as an exemption only on that return.
Divorced or separated spouse
If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse's exemption. This rule applies even if you provided all of your former spouse's support.
Exemptions for Dependents
You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.
The term “dependent” means:
- A qualifying child, or
- A qualifying relative.
The terms “qualifying child” and “qualifying relative” are defined later.
You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met.
- Dependent taxpayer test.
- Joint return test.
- Citizen or resident test.
These three tests are explained in detail later.
All the requirements for claiming an exemption for a dependent are summarized in Table 5.
Table 5. Overview of the Rules for Claiming an Exemption for a Dependent
Caution. This table is only an overview of the rules. For details, see the rest of this publication.
| |
| Tests To Be a Qualifying Child | Tests To Be a Qualifying Relative |
|
|
| 1There is an exception for certain adopted children. | |
| 2There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents, and | |
| kidnapped children. | |
| 3There is an exception if the person is disabled and has income from a sheltered workshop. | |
| 4There are exceptions for multiple support agreements, children of divorced or separated parents, and kidnapped children. | |
Housekeepers, maids, or servants
If these people work for you, you cannot claim exemptions for them.
Child tax credit
You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year. For more information, see the instructions in your tax forms package.
Dependent Taxpayer Test
If you could be claimed as a dependent by another person, you cannot claim anyone else as a dependent. Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent.
If you are filing a joint return and your spouse could be claimed as a dependent by someone else, you and your spouse cannot claim any dependents on your joint return.
Joint Return Test
You generally cannot claim a married person as a dependent if he or she files a joint return.
Example —
You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. The couple files a joint return. Even though your daughter is your qualifying child, you cannot take an exemption for her.
Exception
The joint return test does not apply if a joint return is filed by the dependent and his or her spouse merely as a claim for refund and no tax liability would exist for either spouse on separate returns.
Example —
Your son and his wife each had less than $3,000 of wages and no unearned income. Neither is required to file a tax return. Taxes were taken out of their pay, so they filed a joint return to get a refund. The exception to the joint return test applies, so you are not disqualified from claiming their exemptions just because they filed a joint return. You can claim their exemptions if you meet all the other requirements to do so.
Citizen or Resident Test
You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico, for some part of the year. However, there is an exception for certain adopted children, as explained next.
Adopted child
If you are a U.S. citizen or
U. S. national who has legally adopted a child who is not a U.S. citizen, U.S. resident alien, or U.S. national, this test is met if the child lived with you as a member of your household all year. This also applies if the child was lawfully placed with you for legal adoption. Child's place of residence. Children usually are citizens or residents of the country of their parents. If you were a U.S. citizen when your child was born, the child may be a U.S. citizen even if the other parent was a nonresident alien and the child was born in a foreign country. If so, this test is met. Foreign students' place of residence. Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U.S. residents and do not meet this test. You cannot claim an exemption for them. However, if you provided a home for a foreign student, you may be able to take a charitable contribution deduction. See Expenses Paid for Student Living With You in Publication 526, Charitable Contributions. U.S. national. A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.
Qualifying Child
There are five tests that must be met for a child to be your qualifying child. The five tests are:
- Relationship,
- Age,
- Residency,
- Support, and
- Special test for qualifying child of more than one person.
These tests are explained next.
Relationship Test
To meet this test, a child must be:
- Your son, daughter, stepchild, foster child, or a descendant (for example, your grandchild) of any of them, or
- Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them.
Adopted child
An adopted child is always treated as your own child. The term “adopted child” includes a child who was lawfully placed with you for legal adoption.
Foster child
A foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
Age Test
To meet this test, a child must be:
- Under age 19 at the end of the year,
- A full-time student under age 24 at the end of the year, or
- Permanently and totally disabled at any time during the year, regardless of age.
Example —
Your son turned 19 on December 10. Unless he was disabled or a full-time student, he does not meet the age test because, at the end of the year, he was not under age 19.
Student defined
To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year:
- A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school, or
- A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency.
School defined
A school can be an elementary school, junior and senior high school, college, university, or technical, trade, or mechanical school. However, an on-the-job training course, correspondence school, or school offering courses only through the Internet does not count as a school.
Vocational high school students
Students who work on “co-op” jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students.
Permanently and totally disabled
Your child is permanently and totally disabled if both of the following apply.
- He or she cannot engage in any substantial gainful activity because of a physical or mental condition.
- A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death.
Residency Test
To meet this test, your child must have lived with you for more than half of the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents.
Temporary absences
Your child is considered to have lived with you during periods of time when one of you, or both, are temporarily absent due to special circumstances such as:
- Illness,
- Education,
- Business,
- Vacation, or
- Military service.
Death or birth of child
A child who was born or died during the year is treated as having lived with you all year if your home was the child's home the entire time he or she was alive during the year. The same is true if the child lived with you all year except for any required hospital stay following birth.
Child born alive
You may be able to claim an exemption for a child who was born alive during the year, even if the child lived only for a moment. State or local law must treat the child as having been born alive. There must be proof of a live birth shown by an official document, such as a birth certificate. The child must be your qualifying child or qualifying relative, and all the other tests to claim an exemption for a dependent must be met.
Stillborn child
You cannot claim an exemption for a stillborn child.
Kidnapped child
You can treat your child as meeting the residency test even if the child has been kidnapped, but both of the following statements must be true.
- The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.
- In the year the kidnapping occurred, the child lived with you for more than half of the part of the year before the date of the kidnapping.
- The year there is a determination that the child is dead, or
- The year the child would have reached age 18.
Children of divorced or separated parents
In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. However, the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true.
- The parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance,
- Are separated under a written separation agreement, or
- Lived apart at all times during the last 6 months of the year.
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- Either of the following statements is true.
- The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement made after 1984, later.)
- A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2007 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during the year.
Custodial parent and noncustodial parent
The custodial parent is the parent with whom the child lived for the greater part of the year. The other parent is the noncustodial parent. If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater part of the rest of the year.
Example —
Your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are considered the custodial parent.
Written declaration
The custodial parent may use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. The noncustodial parent must attach the form or statement to his or her tax return. The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. If the exemption is released for more than 1 year, the original release must be attached to the return of the noncustodial parent for the first year, and a copy must be attached for each later year.
Divorce decree or separation agreement made after 1984
If the divorce decree or separation agreement went into effect after 1984, the noncustodial parent can attach certain pages from the decree or agreement instead of Form 8332. To be able to do this, the decree or agreement must state all three of the following.
- The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
- The custodial parent will not claim the child as a dependent for the year.
- The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent.
- The cover page (write the other parent's social security number on this page).
- The pages that include all of the information identified in items (1) through (3) above.
- The signature page with the other parent's signature and the date of the agreement.
Remarried parent
If you remarry, the support provided by your new spouse is treated as provided by you.
Parents who never married
This special rule for divorced or separated parents also applies to parents who never married.
Support Test (To Be a Qualifying Child)
To meet this test, the child cannot have provided more than half of his or her own support for the year.
This test is different from the support test to be a qualifying relative, which is described later. However, to see what is or is not support, see Support Test (To Be a Qualifying Relative), later. If you are not sure whether a child provided more than half of his or her own support, you may find Worksheet 1 helpful.
Scholarships
A scholarship received by a child who is a full-time student is not taken into account in determining whether the child provided more than half of his or her own support.
Special Test for Qualifying Child of More Than One Person
If your qualifying child is not a qualifying child for anyone else, this test does not apply to you and you do not need to read about it. This is also true if your qualifying child is not a qualifying child for anyone else except your spouse with whom you file a joint return. If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents described earlier, see Applying this special test to divorced or separated parents, later.Sometimes, a child meets the relationship, age, residency, and support tests to be a qualifying child of more than one person. Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. To meet this special test, you must be the person who can treat the child as a qualifying child.
If you and another person have the same qualifying child, you and the other person(s) can decide which of you will treat the child as a qualifying child. That person can take all of the following tax benefits (provided the person is eligible for each benefit) based on the qualifying child.
- The exemption for the child.
- The child tax credit.
- Head of household filing status.
- The credit for child and dependent care expenses.
- The exclusion from income for dependent care benefits.
- The earned income credit.
The other person cannot take any of these benefits based on this qualifying child. In other words, you and the other person cannot agree to divide these tax benefits between you.
If you and the other person(s) cannot agree on who will claim the child and more than one person files a return claiming the same child, the IRS will disallow all but one of the claims using the tie-breaker rule in Table 6.
Table 6. When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule)
Caution. If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents, see Applying this special test to divorced or separated parents.
| IF more than one person files a return claiming the same qualifying child and . . . | THEN the child will be treated as the qualifying child of the. . . | |||
| only one of the persons is the child's parent, | parent. | |||
| two of the persons are parents of the child and they do not file a joint return together, | parent with whom the child lived for the longer period of time during the year. | |||
| two of the persons are parents of the child, they do not file a joint return together, and the child lived with each parent the same amount of time during the year, | parent with the higher adjusted gross income (AGI). | |||
| none of the persons are the child's parent, | person with the highest AGI. | |||
Example —
You and your 3-year-old daughter Jane lived with your mother all year. You are 25 years old and earned $9,000 for the year. Your mother is not your dependent. Jane is a qualifying child of both you and your mother because she meets the relationship, age, residency, and support tests for both you and your mother. However, only one of you can claim her. You agree to let your mother claim Jane. This means your mother can claim Jane as a dependent and can claim her as a qualifying child for the child tax credit, head of household filing status, credit for child and dependent care expenses, exclusion for dependent care benefits, and the earned income credit, if she qualifies for each of those tax benefits (and if you do not claim Jane as a dependent or as a qualifying child for any of those tax benefits).
Example —
The facts are the same as in Example 1 except that you and your mother both claim Jane as a dependent and claim her as a qualifying child for the child tax credit and earned income credit. In this case, you as the child's parent will be the only one allowed to claim Jane as a dependent and claim her as a qualifying child for the child tax credit and earned income credit. The IRS will disallow your mother's claim to these tax benefits unless she has another qualifying child.
Example —
The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. Only one of you can claim each child as a dependent. However, you and your mother can split the three qualifying children between you. For example, you can claim one child as a dependent and your mother can claim the other two.
Example —
The facts are the same as in Example 1 except that you are only 18 years old and did not provide more than half of your own support for the year. This means you are your mother's qualifying child and she could claim you as a dependent. Because of the Dependent Taxpayer Test explained earlier, you cannot treat your daughter as a qualifying child and cannot claim her as a dependent. Only your mother can treat