If you qualify to take your nephew as a dependent, you may. It isn't as simple as having the parent "gift" you the deduction.
Qualifying Child
Relationship — the
taxpayer’s child or stepchild (whether by blood or adoption), foster child,
sibling or step-sibling, or a descendant of one of these.
Residence — has the same
principal residence as the taxpayer for more than half the tax year. Exceptions
apply, in certain cases, for children of divorced or separated parents,
kidnapped children, temporary absences, and for children who were born or died
during the year.
Age — must be under the age
of 19 at the end of the tax year, or under the age of 24 if a full-time student
for at least five months of the year, or be permanently and totally disabled at
any time during the year.
Support — did not provide
more than one-half of his/her own support for the year.
If a child is claimed as a qualifying child by two or more
taxpayers in a given year, the child will be the qualifying child of:
- the parent;
- if more than one taxpayer is
the child’s parent, the one with whom the child lived for the longest time
during the year, or, if the time was equal, the parent with the highest
AGI;
- if no taxpayer is the child’s
parent, the taxpayer with the highest adjusted gross income (AGI).
The Child
Tax Credit is an important tax credit that may be worth as much as $1,000 per
qualifying child depending upon your income. Here are 10 important facts from
the IRS about this credit and how it may benefit your family.
- Amount - With the Child Tax Credit, you may be able to reduce your
federal income tax by up to $1,000 for each qualifying child under the age
of 17.
- Qualification - A qualifying child for this credit is someone who meets the
qualifying criteria of six tests: age, relationship, support, dependent,
citizenship, and residence.
- Age Test - To
qualify, a child must have been under age 17 – age 16 or younger – at the end of 2017.
- Relationship Test - To claim a child for purposes of the Child Tax Credit, they
must either be your son, daughter, stepchild, foster child, brother,
sister, stepbrother, stepsister or a descendant of any of these
individuals, which includes your grandchild, niece or nephew. An adopted
child is always treated as your own child. An adopted child includes a
child lawfully placed with you for legal adoption.
- Support Test - In order to claim a child for this credit, the child must
not have provided more than half of their own support.
- Dependent Test - You must claim the child as a dependent on your federal tax
return.
- Citizenship Test - To meet the citizenship test, the child must be a U.S.
citizen, U.S. national, or U.S. resident alien.
- Residence Test - The child must have lived with you for more than half of
2017. There are some exceptions to the residence test, which can be found
in IRS Publication 972, Child Tax Credit.
- Limitations - The credit is limited if your modified adjusted gross
income is above a certain amount. The amount at which this phase-out
begins varies depending on your filing status. For married taxpayers
filing a joint return, the phase-out begins at $110,000. For married
taxpayers filing a separate return, it begins at $55,000. For all other
taxpayers, the phase-out begins at $75,000. In addition, the Child Tax
Credit is generally limited by the amount of the income tax you owe as
well as any alternative minimum tax you owe.
- Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the
amount of income tax you owe, you may be able to claim the Additional
Child Tax Credi
