If you have a child that is temporarily incarcerated, are you allowed to claim them as a dependent on your federal income tax return?
Section 152(a)(1) permits taxpayers to claim as a dependent any “qualifying child.” Section 152(c)(1)(A)-(E) defines a “qualifying child” as a child of the taxpayer, under the age of 19 or under the age of 24 if a “student,” who has not filed a joint income tax return with anyone else, who did not provide more than one-half of their own support, and who has the “same principal place of abode” as the parent claiming them.
The focus here is on having the same principal place of abode. The reference to a "principal" place of abode implies there may be a "secondary" place of abode. What kinds of non-principal places of abode qualify? Certainly temporary college dorms, but what about temporary incarceration?.
Regulations explain that a “nonpermanent failure to occupy the common abode… shall be considered temporary absence due to special circumstances.” However, the specifically stated exceptions are illness, education, business, vacation, military service, or family custody agreement. Regulations never said those were the only exceptions; it merely provided examples of special circumstances. Incarceration is certainly a nonpermanent failure to occupy the same abode due to special circumstances.
Haywood v. Commissioner
In Haywood v. Commissioner, the U.S. Tax Court was faced with this specific question. However, this ruling is highly fact-based and incorrectly decided by the court. First, this case dealt with an adult child (age 19 or over) that was incarcerated. Had this been a juvenile case, the child would have been eligible since Section 152(c)(1)(D) specifically states that a dependent is one “who has not provided over one-half of such individual’s own support." Second, in this case, the adult child was in a state-run prison, which led the judge to conclude that because “support provided to [dependent] by the State prison system where he was incarcerated far exceeded the monetary amounts provided by” his mother, she could not claim him. This ill-informed judge appears to have forgotten that state-run prisons are financed by the general public through our taxing system. The mother did, in fact, indirectly pay for her son's own incarceration. And if state-provided resources and benefits are now take into account for purposes of determining support, it would create chaos in low-income communities that rely heavily on social programs. I doubt this U.S. Tax Court Judge would qualify as a member of my firm’s research staff.
Suffice it to say, our firm concludes that you may claim an incarcerated child as a dependent on your U.S. federal and state income tax returns. If the return is prepared and submitted by our firm, we will fully defend it an no additional cost.
It is our firm’s position that an incarcerated child, despite being temporarily absent from the abode due to special circumstances, maintains the same principal place of abode as any parent claiming said child.
However, this is an issue for which the IRS will likely challenge your claim, so we strongly recommend having our firm handle your federal income tax return.