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My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?

 

I'm wondering if the Earned Income Tax Credit would provide a more substantial tax break for my girlfriend and a higher monetary return than it would If I were to claim my daughter. I make about $80k/year and pay daycare expenses, $7200/yr. My girlfriend makes just under the Medicaid threshold for a single parent, $22,932.

 

Which scenario would provide us the biggest tax break/return?

 

Thanks!

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6 Replies

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?

Important: the answer below assumes that you and your GF are both the biological parents of the child and the child lives with you more than half the year.  If the child is only the biological child of one of you, only that parent can claim the child as a dependent on their tax return. 

 

My guess is that your girlfriend should claim the child, but only you can test the different possibilities and know for sure.  If using turbotax online, you will need separate online accounts for each taxpayer, and you will pay separate fees.  Your girlfriend can use the Tax Freedom version, if the regular "free to start" version tries to charge a fee for certain forms.  If you use the desktop version installed on your own computer, you can make as many test returns as you want, they are stored as different documents.

 

Your girlfriend can claim the childcare expenses as well, unless you used a workplace FSA to pay them.  (If you did use an FSA, then by not claiming the child as a dependent yourself, you will increase your own taxable income, which is why only you can really test which scenario is best in your case.)   She can say the expenses were a gift from you to her and then she paid them.  (This should survive an audit, if it comes to that, although it would be better if the payments came from a checking account in her name or a joint account.)

 

Whatever you do, be sure that the person who does not claim the child as a dependent does not list the child at all on their return, and the person who does claim the child answers "No" to the question about an agreement to share custody.  This question only applies to parents who are divorced or separated and living apart.  And make sure that if you make test returns, you triple check to make sure the returns you actually file only contain the correct and final information you want to include. 

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?

Just a add a few thought about Medicaid ... State laws vary, but based on the Federal rules your child does not qualify for Medicaid.  The eligibility would be based on BOTH of your incomes, and with about $100,000 of income, it is doubtful the child qualifies.

 

And if you were to claim the child (rather than your girlfriend), that could affect your girlfriend's eligibility for Medicaid.

 

So you and your girlfriend may want to look into your State's Medicaid eligibility rules.

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?

This is great info. Thanks for the direction. Since she is planning on moving in with me in the near future, I will take a look at the Medicaid qualifications and thoroughly assess that situation. I ran some numbers on the tax estimator and it looks like she would gain more benefit filing by herself. It may all be a moot point any way if moving in effects her medicaid.

 

I will look into the FSA gift idea you mentioned. I like that!

 

Thanks for all the help!

Hal_Al
Level 15

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?

 If you and the other parent live together, either one of you (but not both) may claim the child. You may decide between you which one will claim the child. Only if you can’t agree, do the IRS tie breaker rules apply, to see who has first choice. It may be worthwhile to prepare trial returns, both ways,  to see which way the family comes out best. This tool may be useful: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/?s=1.

 

If you claim the child, you may use Head of Household (HoH) filing status. If you do not claim the child, you must use Single filing status.  Your girlfriend must use Single filing status whether she claims the child or not.  

 

You must claim the child, as a dependent, to claim the dependent  care (day care) credit. 

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?


@smccaffrey23 wrote:

This is great info. Thanks for the direction. Since she is planning on moving in with me in the near future, I will take a look at the Medicaid qualifications and thoroughly assess that situation. I ran some numbers on the tax estimator and it looks like she would gain more benefit filing by herself. It may all be a moot point any way if moving in effects her medicaid.

 


You changed the parameters of the situation.

 

For 2020, you can only claim your child as a dependent if the child lived in your home (slept/spent the night in your home) more than half the nights of the year.  That's 183 or more nights.  Suppose they move in Sept 1, that would be about 120 nights until the end of 2020.  Did the child sleep over in your home at least 63 other nights?

 

If not, then you can't claim the dependent care credit even if you paid for care, and you can't use head of household status, even if you support your GF and child.  You could only claim the child as a dependent if the other parent gives you a signed form 8332 waiver and agrees not to claim the child.  The other parent can still use the child to qualify for EIC.  This probably makes it more likely that your GF should claim the child, since a significant part of your tax savings would come from claiming HOH status, which you can't do unless the child lived in your home more than half the nights of the year. 

My girlfriend and daughter are on Medicaid and live with me. Who would benefit more from claiming our daughter?


@smccaffrey23 wrote:

Since she is planning on moving in with me in the near future, I will take a look at the Medicaid qualifications and thoroughly assess that situation. ... It may all be a moot point any way if moving in effects her medicaid.

 


Your original post seemed to indicate they already lived with you.  If the child did not live with you for at least 6 months, that may change things in several ways (for both tax purposes and Medicaid purposes).  So you may want to clarify that situation.

 

If your girlfriend moves in with you, it shouldn't affect her Medicaid, but it would probably affect your daughter's Medicaid.

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