Family

The Legal Definition of a Qualifying Child under Section 24(c)

by John Anthony Castro, J.D., LL.M.

Introduction

Many provisions under the Internal Revenue Code condition a deduction or credit on a dependent child being a “qualifying child” pursuant to Section 24(c). For that reason, we present this article as a thorough and exhaustive analysis of the term.

Qualifying Child

Other than in the years 2018-2025, a taxpayer could claim one dependency exemption for each qualifying child.[1] Although personal and dependency exemptions have been suspended in the years 2018-2025,[2] the definition of a dependent remains important for other Code provisions, such as head of household filing status under Section 2(b), the child and dependent care credit under Section 21, the child tax credit under Section 24, and the earned income credit under Section 32. One of the conditions for dependent status is that the individual claimed was either a qualifying child or a qualifying relative of the taxpayer.

An individual must satisfy five tests to be a qualifying child:[3]

(1) the individual must bear a certain relationship to the taxpayer (the relationship test);

(2) the individual must have the same principal place of abode as the taxpayer for more than one-half of tax year (the residency test);

(3) the individual must meet certain age or disability requirements (the age or disability test);

(4) the individual must not have provided over one-half of his/her own support for the calendar year in which the tax year of the taxpayer begins (the support test);[4] and

(5) the individual must not have filed a joint return (other than only for a claim of refund) with the individual’s spouse under Section 6013 for the tax year beginning in the calendar year in which the tax year of the taxpayer begins.[5]

Special rules apply if more than one taxpayer may claim the same qualifying child as a dependent (the tie-breaker rule).

If the parents of an individual may claim the individual as a qualifying child, but no parent actually claims the individual, that individual may be claimed as the qualifying child of another taxpayer but only if the adjusted gross income of such taxpayer is higher than the highest adjusted gross income of any parent of the individual.[6]

If an individual is not a qualifying child, an individual may still qualify as a taxpayer’s dependent if the child was a qualifying relative (i.e., the child’s gross income is less than the exemption amount and the child receives over one-half of his/her support from the taxpayer).

Relationship Test

A qualifying child must satisfy the relationship test with respect to the taxpayer.[7] Under this test, a qualifying child must be: (1) the taxpayer’s son, daughter, stepson or stepdaughter, (2) a descendent of the taxpayer’s son, daughter, stepson or stepdaughter, (3) the taxpayer’s brother, sister, stepbrother, or stepsister, or (4) a descendant of the taxpayer’s brother, sister, stepbrother, or stepsister of the taxpayer.[8]

Under the relationship test, a legally adopted child of an individual is treated as a child of such individual by blood.[9]

An eligible foster child means an individual placed with the taxpayer by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.[10] An authorized placement agency may be a State, the District of Columbia, a possession of the United States, a foreign country, an agency or organization authorized by, or a political subdivision of, any of these entities to place children in foster care or for adoption. An authorized placement agency also may be an Indian Tribal Government (ITG) (as defined in Section 7701(a)(40)), or an agency or organization authorized by, or a political subdivision of, an ITG that places children in foster care or for adoption.[11]

Siblings of half-blood are treated as the same as siblings of full blood under the relationship test.[12]

Residency Test

A qualifying child must satisfy the residency test. Under this test, a qualifying child must have the same principal place of abode as the taxpayer for more than one-half of the tax year.[13] There are exceptions for temporary absences, children who were born or died during the year, kidnapped children and the children of divorced or separated parents.2

Temporary Absence

An individual is deemed to occupy the same principal place of abode as the taxpayer (and vice versa) during temporary absences for illness, education, business, vacation, and military service, institutionalized care for a child who is totally and permanently disabled (as defined in Section 22(e)(3)), or incarceration.[14]

Birth or Death of Child During the Tax Year

If an individual is a member of a household for less than the full tax year as a result of the individual’s birth, death, adoption, or placement with a taxpayer for adoption or in foster care during that year, the requirement that the individual be a member of the household for more than one-half of the tax year is satisfied if the individual is a member of the household for more than one-half of the period after the individual’s birth, adoption, or placement for adoption or in foster care or before the individual’s death.[15] If an infant must remain in a hospital for a period of time after birth and would have resided with the taxpayer during that period but for the hospitalization, the infant is treated as having the same principal place of abode as the taxpayer during the period of hospitalization.[16]

To be considered a dependent, the child must have been born alive (as determined under state or local law), even if it lived only for a moment. Live birth must be proven by an official document, such as a birth certificate. No dependency exemption is allowed for a child unborn at the end of a tax year.[17] Similarly, no dependency exemption is allowed for a stillborn child.[18]

Missing Children

A child of the taxpayer who is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of the family of either the child or the taxpayer, and who had for the tax year in which the kidnapping occurred the same principal place of abode as the taxpayer for more than one-half of the portion of the tax year before the date of the kidnapping, is treated as meeting the residency test for a qualifying child of the taxpayer for all tax years ending during the period that the child is missing. Also, the child is treated as meeting the residency test in the year of the child’s return if the child has the same principal place of abode as the taxpayer for more than one-half of the portion of the tax year following the date of the child’s return.[19]

This rule ceases to apply as of the first tax year of the taxpayer beginning after the calendar year in which there is a determination that the child is dead or, if earlier, in which the child would have attained age 18.[20]

Age or Disability Test

A qualifying child must satisfy the age or disability test. Under this test, a qualifying child must be younger than the taxpayer claiming the individual and must be under age 19 at the end of the tax year, or under age 24 at the end of the tax year and a student. This requirement is satisfied if the individual is permanently and totally disabled at any time during the tax year, regardless of age.[21]

Student

To qualify as a full-time student, a qualifying child must be, for some part of each of the five calendar months of the calendar year in which the taxpayer’s year begins:

(1) a full-time student at an educational organization which normally maintains a regular faculty and curriculum, and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on;[22] or

(2) a student pursuing a full-time course of institutional on-farm training under the supervision of an accredited agent of an educational organization which normally maintains a regular faculty and curriculum, and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on, or under the supervision of a state, county, or local government.[23]

Full-Time Attendance Required

A full-time student is one who is enrolled for the number of hours or courses a school considers to be full-time attendance for some part of five calendar months.[24] The five calendar months need not be consecutive.[25]

“Co-Op” Jobs

Vocational high school students who work on co-op jobs in private industry as part of the school’s prescribed course of classroom and practical training are full-time students. The Service has held that a vocational high school student who, in accordance with his prescribed course of training, is placed in a co-op job at certain specified intervals for practical training in conjunction with his prescribed course of classroom study is a full-time student during the time spent in the co-op job, as well as during the time when in attendance at school.[26]

Educational Institution

The term “educational institution” means a school maintaining a regular faculty and established curriculum, and having an organized body of students in attendance. It includes elementary schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools.

The Service has ruled that an institute, which gives specialized training, in conjunction with a large manufacturing corporation (which owns the institute) and which has a permanent faculty, and a regularly organized body of students in attendance, and offers credits which are recognized by other institutes of higher learning, qualifies as an educational institution.[27] An educational institution may be an accredited school of nursing maintained by a hospital and approved and registered by a state board for registration of nurses.[28]

Medical Internship

The Tax Court has refused to allow a student dependency exemption for a child who is serving his medical internship.[29] The Tax Court sustained the Regulation[30] which allows the exemption only when the child is attending an institution that “normally maintains a regular faculty and curriculum and has a regularly organized body of students.”[31]

Medical Training Programs

The Service has similarly ruled that a general hospital that provides training programs for medical students, interns and residents does not qualify as an educational institution for purposes of the dependency exemption where the hospital’s primary purpose is to provide medical care for the sick and injured.[32] However, a division or segment of the hospital whose primary purpose is the education of students may qualify.

Permanently and Totally Disabled Individual

An individual is permanently and totally disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. An individual is not be considered to be permanently and totally disabled unless he or she furnishes proof of the disability in the form and manner at the time required by the Secretary.[33]

Support Test

A qualifying child must satisfy the support test. Under this test, the child must not have provided more than half of his or her own support for the year.[34] Therefore, an individual may be the taxpayer’s qualifying child even though the taxpayer does not provide over half of the child’s support. This test is different from the support test to be a qualifying relative, which focuses instead on the support the taxpayer provided to the relative. However, the definition of “support” for purposes of the qualifying relative support test is the same for the qualifying child support test.

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.[35]

Tie-Breaker Rules Between Claimants

It is possible for a child to meet the relationship, residency, age or disability, and support tests to be a qualifying child of more than one taxpayer. Although the child is a qualifying child of each of these taxpayers, only one taxpayer can actually treat the child as a qualifying child.[36] 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:

(1) the parents: (a) are divorced or legally separated under a decree of divorce or separate maintenance, (b) are separated under a written separation agreement, or (c) lived apart at all times during the last 6 months of the year, whether or not they are or were married;

(2) the child received over half of his or her support for the year from the parents;

(3) the child is in the custody of one or both parents for more than half of the year; and

(4) either: (a) the custodial parent signs a written declaration 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, or (b) a pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2017 states that the noncustodial parent can claim the child as a dependent, the decree or agreement wasn’t changed after 1984 to say the noncustodial parent can’t claim the child as a dependent, and the noncustodial parent provides at least $600 for the child’s support during the tax year.[37]

In absence of an agreement between the parents, Section 152(c)(4) provides a tie-breaker rule for determining which taxpayer may claim a qualifying child as a qualifying child when two or more taxpayers claim the same child for a tax year beginning in the same calendar year. (Note that Section 152(c)(4) is subordinate to Section 152(e) which provides the rules applicable to divorced or separated parents. Section 152(e) generally provides that the custodial parent is entitled to the dependency exemption unless it is specifically waived.)

The Section 152(c)(4) tiebreaker rules generally provide that the eligible taxpayer who is a parent (eligible parent) of the individual may claim the individual as a qualifying child; in other words, if a parent may claim a qualifying child, no other person may claim that child.[38] If there is no eligible parent, then the individual may be claimed by the eligible taxpayer with the highest adjusted gross income.

If more than one of the eligible taxpayers is a parent of the individual, more than one eligible parent claims the individual as a qualifying child, and the eligible parents claiming the individual do not file a joint return with each other, the individual is treated as the qualifying child of the eligible parent claiming the individual with whom the individual resided for the longest period of time during the tax year. If the individual resided with each eligible parent claiming the individual for the same amount of time during the taxable year, the individual is treated as the qualifying child of the eligible parent claiming the individual with the highest adjusted gross income.[39]

If at least one, but not all, of two or more eligible taxpayers is a parent of the individual, but no eligible parent claims the individual as a qualifying child, another eligible taxpayer may claim the individual, but only if the eligible taxpayer’s adjusted gross income is higher than the adjusted gross income of each eligible parent. If a child’s parents file a joint return with each other, this rule may be applied by dividing the parents’ combined AGI equally between the parents.[40] However, proposed regulations would change this interpretation regarding a taxpayer’s adjusted gross income on a joint return and provide that, in applying the tiebreaker rules that treat an individual as the qualifying child of the eligible taxpayer with the higher or highest adjusted gross income, the adjusted gross income of a taxpayer who files a joint tax return is the total adjusted gross income shown on the return.[41]

The proposed regulations also would expand the tiebreaker rule in Section 152(c)(4)(C) to address this situation in which an eligible parent does not claim an individual as a qualifying child and two or more taxpayers, none of whom is a parent, are eligible to claim the individual as a qualifying child and each has adjusted gross income higher than any eligible parent. In this situation, the proposed regulations provide that the individual is treated as the qualifying child of the eligible taxpayer with the highest adjusted gross income.[42]

Application of the Tiebreaker Rules

If more than one taxpayer claims a child as a qualifying child, the child is treated as the qualifying child of only one taxpayer (as determined under the tie breaker rules) for purposes of the five provisions that sue the uniform definition of a qualifying child: the filing status of head of household under Section 2(b), the child and dependent care credit under Section 21, the child tax credit under Section 24, the earned income credit under Section 32, and the dependency exemption under Section 151 (suspended for the years 2018-2025), as well as for purposes of the exclusion for dependent care assistance under Section 129 (which may apply to the care of a dependent qualifying child under age 13). Thus, in general, the tiebreaker rules for determining which taxpayer may claim a child as a qualifying child apply to these provisions as a group, rather than on a section-by-section basis.[43]

There is an exception to the rule that only one taxpayer may claim a child as a qualifying child for all purposes. The exception applies if Section 152(e) applies (see § 32:22). Section 152(e) has a special rule for divorced or separated parents that determines who, as between the custodial and noncustodial parent, may claim a child as a qualifying child or qualifying relative if certain tests (different from the general tests under Sections 152(c) and (d)) regarding residency and support are met and the custodial parent releases a claim to exemption for the child. If this special rule applies, a noncustodial parent may claim a child as a qualifying child for purposes of the dependency exemption and the child tax credit (the only two of the provisions addressed in the notice to which Section 152(e) applies in determining who is a qualifying child), and another taxpayer may claim the child for one or more of the other benefits to which section 152(e) does not apply.[44]

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About the Author

John Anthony Castro, J.D., LL.M., is the Managing Partner of Castro & Co., the author of International Taxation in Plain English as well as International Estate Planning in Plain English, an esteemed graduate of Georgetown University Law Center in Washington DC, an OPM Fellow at Harvard Business School, and an internationally recognized tax attorney with offices in New York, Los Angeles, Miami, Chicago, Dallas, and Washington DC.

To provide feedback on this article or suggest an idea for a future article, please contact Tiffany Michelle Hunt, J.D., LL.M., Director of Tax Planning at Castro & Co., at T.Hunt@CastroAndCo.com.


Bluebook Citation: John Anthony Castro, The Legal Definition of a Qualifying Child under Section 24(c), Int’l Tax Online Law Journal (Mar. 27, 2020) url.


[1] IRC §§ 151(c), 152(a)(1).

[2] IRC § 151(d)(5), as amended by the Tax Cuts and Jobs Act, Pub L. No. 115-97, § 11041(a).

[3] IRC § 152(c)(1), as amended by the Fostering Connections to Success and Increasing Adoptions Act of 2008, Pub. L. No. 110-351, § 501. Prop. Reg. § 1.152-2(a).

[4] The support test for purposes of determining who is a qualifying child is different than the support test for determining who is a qualifying relative.

[5] IRC § 152(c)(1)(E), added by the Fostering Connections to Success and Increasing Adoptions Act of 2008, Pub. L. No. 110-351, § 501, applicable in tax years beginning after 2008.

[6] IRC § 152(c)(4)(C), added by the Fostering Connections to Success and Increasing Adoptions Act of 2008, Pub. L. No. 110-351, § 501(c)(2)(A), applicable in tax years beginning after 2008.

[7] IRC § 152(c)(1)(A); Prop. Reg. § 1.152-2(b).

[8] IRC §§ 152(c)(2), 152(f)(1).

[9] IRC § 152(f)(1)(B), as amended by Pub. L. No. 108-311; Prop. Reg. § 1.152-2(c)(2). The amendment provides that, to be a dependent of a taxpayer, a qualifying child is a child lawfully placed with the taxpayer for adoption. Prior law required that a, adopted child, like a foster child, be placed with the taxpayer for adoption by an authorized placement agency.

[10] IRC § 152(f)(1)(C).

[11] Prop. Reg. 1.152-1(b)(1)(iv).

[12] IRC § 152(f)(4).

[13] IRC § 152(c)(1)(B).

[14] Reg. § 1.152-1(b); Prop. Reg. § 1.152-4(c)(2). See also IRS Pub. No. 501.

[15] Prop. Reg. 1.2-2(d)(4); Reg. § 1.152-1(b); IRS Pub. No. 501.

[16] Prop. Reg. § 1.152-4(c)(2).

[17] Cassman v. U.S., 31 Fed. Cl. 121, 94-1 U.S. Tax Cas. (CCH) P 50204, 73 A.F.T.R.2d 94-1837 (1994). According to the Federal Claims Court, if the dependent exemption were available from the date of conception, taxpayers would be entitled to exemptions for miscarriages, abortions, and stillbirths, placing the Service in the impossible position of establishing when pregnancies did or did not occur.

[18] IRS Pub. No. 501.

[19] IRC § 152(f)(6)(A); Prop. Reg. § 1.152-4(e)(1). This rule applies only for purposes of determining: (1) the dependency exemption deduction under IRC § 151(c); (2) the child tax credit under IRC § 24; (3) whether an individual is a surviving spouse or a head of a household (as such terms are defined in IRC § 2); and (4) the earned income credit under IRC § 32. IRC § 152(f)(6)(B).

[20] IRC § 152(f)(6)(D); Prop. Reg. § 1.152-4(e)(3).

[21] IRC § 152(c)(3), as amended by the Fostering Connections to Success and Increasing Adoptions Act of 2008, Pub. L. No. 110-351, § 501(c). The amendment added the requirement that the child be younger then the taxpayer claiming him/her, applicable to tax years beginning after 2008. Prop. Reg. § 1.152-2(d).

[22] IRC § 152(f)(2)(A); Prop. Reg. § 1.152-1(b)(2). A student must be enrolled for the number of hours or courses for some part of five calendar months, not necessarily consecutive, which make full-time. “Full-time attendance of course will not include attendance at night school while holding a job during the day; this will be considered as part-time attendance.” S Rep No. 1622, 83rd Cong, 2d Sess 193. See, Rev. Rul. 57-484, 1957-2 C.B. 113, where the student alternated periods of study and employment.

[23] IRC § 152(f)(2)(B); Prop. Reg. § 1.152-1(b)(2).

[24] Prop. Reg. § 1.152-1(b)(2); Rev. Rul. 72-449, 1972-2 C.B. 83.

[25] The five calendar months must fall in the calendar year in which the taxpayer’s year begins. Full-time attendance at an educational institution may include some attendance at night in connection with a full-time course of study. See Rev. Rul. 72-449, 1972-2 C.B. 83.

[26] Rev. Rul. 57-561. A Spanish teacher who was not enrolled in any academic institution unsuccessfully argued that he was a full-time student while teaching in a Spanish-speaking area. St. John v. C.I.R., T.C. Memo. 1970-238, T.C.M. (P-H) P 70238, 29 T.C.M. (CCH) 1045, 1970 WL 1772 (1970), acquiescence recommended, 1971 WL 29054 (I.R.S. AOD 1971).

[27] Rev. Rul. 57-484.

[28] Rev. Rul. 58-338.

[29] Bayley v. C. I. R., 35 T.C. 288 (T.C. 1960), acq., 1961-2 C.B. 3; Rev. Rul. 68-604.

[30] Reg § 1.151-3(b), (c), removal proposed by REG-137604-07.

[31] See also S. Rep No. 1622, 83rd Cong, 2d Sess 20, 193.

[32] Rev. Rul. 68-604.

[33] IRC § 22(e)(3).

[34] IRC § 152(c)(1)(D); Prop. Reg. § 1.152-2(e).

[35] IRC § 152(f)(5); Prop. Reg. § 1.152-4(a)(6).

[36] IRC § 152(c)(4).

[37] See IRS Pub. No. 501.

[38] See Prop. Reg. § 1.152-2(g)(1).

[39] IRC § 152(c)(4)(B); Prop. Reg. § 1.152-2(g)(1).

[40] IRS Pub. 501 has so provided since 2009.

[41] Prop. Reg. § 1.152-2(g)(2). The prior interpretation is changed to be consistent with other Code sections that require the filing of a joint return to claim a benefit and therefore calculate income based on the entire amount shown on the joint return.

[42] Prop. Reg. § 1.152-2(g)(1)(ii).

[43] Prop. Reg. § 1.152-2(g)(3). This rule had been provided in Notice 2006-86.

[44] Prop. Reg. § 1.152-2(g)(3).

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