Recent changes to federal tax law create a “Uniform Definition of Child” that is effective beginning in tax year 2005. The new law creates a uniform definition of qualifying child for the tax benefits that relate to children. Under the new law, a qualifying child must meet only three tests, relationship, residence, and age:
1. Relationship: The child must be the taxpayer’s son, daughter, stepchild, sibling, stepsibling, or a descendant of such individuals. Foster children placed with the taxpayer by authorized placement agencies would satisfy the relationship test. If the child is the taxpayer’s sibling or stepsibling or a descendant of any such individual, the taxpayer must care for the child as if the child were his or her own child.
2. Residence: The child must live with the taxpayer in the same principal place of abode in the United States for over half the year. Military personnel on extended active duty outside the United States would be considered to be residing in the United States. As under current law, the taxpayer and child are considered to live together even if one or both are temporarily absent due to special circumstances such as illness, education, business, vacation, or military service.
3. Age: The child must be under the age of 19, a full-time student if over age 18 and under age 24, or totally and permanently disabled. However, as under current law, qualifying children (who are not disabled) must be under age 13 for purposes of the child and dependent care tax credit and under 17 (whether or not disabled) to qualify for the child tax credit.
A tie-breaker rule similar to the current EITC tie-breaker applies if more than one qualifying taxpayer claims a benefit for the same child.
This new rule affects the following tax benefits.
* The dependency exemption.
* The child tax credit.
* The earned income credit.
* The dependent care credit.
* Head of household filing status.