When several relatives collectively combine to support another relative there is some debate as to who qualifies to claim the “dependent” exemption for that relative. Lindemeyer CPA is available to help clear up these issues and advise on the best possible solution for your family.
The exemption may be available under the rules for multiple support agreements but in order to claim the “qualifying relative” as a dependent the following five conditions must first be met by the dependent under the rules for multiple support agreements.
- the dependent must either be a relative of the claimant or a member of his household
- must not have gross income above the exemption amount ($3900 in 2013; $4000 (projected) in 2014)
- must not file a joint return
- must be a U.S. citizen or resident
- must have more than 50% of his support provided by the claimant
Where no one individual meets the more-than-50% support test a multiple support agreement may be used. Two or more individuals together provide 50% of the individuals support and meets the four other tests. In a group situation typically several relatives are combining to support a dependent relative providing more than 50% support. When this type of group exists any group member providing more than 10% of the support can qualify to claim the exemption.
Group members should decide who will claim the exemption for that year and then all non-claiming members should sign a declaration agreeing not to claim it. The member claiming the exemption will either attach Form 2120 to his or her return or attach a statement to their return identifying each of the people who provided more than 10% of the support and indicating that he or she obtained the declarations. He or she must then retain the declarations for tax purposes. Different group members can claim the exemption in different years if test conditions are met each year.
For example $20000 is spent toward the support of Grandpa in the following manner: $3000 from Social Security benefits $5000 by a son Bob $5000 each by his grandchildren Billy and Bridget and $2000 by Grandpa’s brother Bill. Grandpa’s gross income is less than the exemption amount in (2) above and all of the dependency tests outlined above are met except the support test.
Since Bob Billy Bridget and Bill are all qualifying relatives and provide more than $10000 in support they qualify as a group. Bob Billy Bridget and Bill must decide who among them will claim the exemption. Although Bill is part of the group and his support contribution is counted to boost the group total beyond the $10000 threshold he himself cannot claim the exemption because his contribution is not greater than 10% of the dependent’s support (10% of the $20000= $2000).
If any one individual provides more than 50% in support only that individual is eligible to claim the exemption. So in the example above if Bob contributed more than $10000 toward Grandma’s $20000 of total support only he would qualify for the exemption.
Only qualifying relatives (or an individual of whose household the dependent is a member can form a qualifying group. If another person contributes to the dependent’s support he cannot be part of the group because he does not meet dependency test (1) as described above.
Finally keep in mind that whoever claims the exemption must include the dependent’s social security number on the claimant’s return. Claiming the exemption but omitting the social security number will result in a summary assessment of tax liability.
If you and several other family members are helping a loved one and need further assistance determining who is eligible to claim the dependent family member click here for an initial consultation to discuss your particular family situation with Lindemeyer CPA. We are here to assist you with any tax and financial situations you encounter.