Can I claim my child as a dependent on my Federal Return, but not on my Maryland Return?

[SonomaOak]

I get no benefit from Maryland for dependents (I make too much), but my child is getting hosed on their small income. I want to claim my child on my federal return, but not on my state return, and my child's federal return will show them as my dependent, but on their state return they will not be a dependent. Can I do this?

[SonomaOak · Accepted solution]

I found the answer to my question by going to other resources.

For anyone else with the same question, it is not possible to claim a child as dependent on your federal return, but not claim them as dependent on your Maryland return. In Maryland, if you are listed as a dependent on someone else's Federal return (i.e. you parents), then you must list yourself as being a dependent on your own state return.

[avjunior]

This whole area of 'can' someone be claimed as a dependent and 'have' they been claimed seems overly confusing to me.  Experts here are unanimous in saying if a child can be claimed as a dependent then the box on the child's 1040 that says "Someone can claim: You as a dependent" must be checked even if no one claims the child.

Now what about MD?  MD says the child's filing status must be the same as the 1040.  But on the 1040 the filing status is 'Single'.  There are two choices for single on the MD 502- box 1 single, and box 6 dependent taxpayer.  However box 1 says "if you can be claimed on another person's tax return use Filing Status 6".  But if on the child's return box 6 is checked they can't have an exemption, which significantly raises their tax

I would naively assume if the parent doesn't claim on federal (losing $500) or MD (in my case losing nothing) then the child should be able to check box 1 and get the exemption.  I also don't know how to get a definitive answer to this.

[avjunior]

I would just like to add to my previous post that the MD code seems to provide different answers under the sections for resident and non-resident filers.  The 'resident' section says "may be claimed".  The 'non-resident' section says "claimed".

Section 03.04.02.02 - Resident Filing Status:

B. An individual who is single and may be claimed as a dependent on another taxpayer's return shall use the filing status "dependent taxpayer".

Section 03.04.02.03 - Nonresident Filing Status:

D. Single Dependent. "Dependent taxpayer" filing status shall be used by each individual who is:

(1) Single;

(2) Claimed as a dependent by another taxpayer; and

(3) Required to file a State income tax return.

[Opus 17]

This didn't get much attention at the time, I will see if anyone else has an opinion. 

@TomD8 

@Hal_Al 

@rjs 

There are two questions on a person's federal return.   For the question,  "Can you be claimed as a dependent?" you must answer yes if you can be claimed, even if you don't want to be claimed and even if the person who could claim you agrees not to.  The point is that if you are being provided for by someone else (qualify as a dependent), there are certain tax benefits you are not entitled to in your own name, even if the person doesn't actually claim you as a dependent.  If the person who could claim you agrees not to, and you falsely answer "no" and claim some tax benefit, that could be considered fraud. 

I assume Maryland follows the same rules on their state return.

On the federal return there is a second question, "Will the person who could claim you, actually claim you this year?"  This only affects eligibility for the American Opportunity Credit.  In the situation where the parent's income is too high to get the credit, the child might get some credit in their own name if they are not actually claimed as a dependent.  This is the only tax situation where you can get a benefit if you qualify to be a dependent, but are not a dependent.  

Maryland could have different rules for residents and non-residents, that's their prerogative to decide.  

[Mike9241]

for federal purposes a taxpayer does not have to claim his dependents. however, the dependents must still indicate that they can be claimed as a dependent on their federal return. 

the MD regulations do not make what you posted any clearer. To me it would seem if you do not claim him as a dependent on your MD return then box 1 on his MD return would be proper. However, you should wait for a response from someone more familiar with MD income taxes. 

i will point out that quit often state and federal tax laws are not the same in which case you follow federal rules for the federal 1040 and state rules for state tax returns. 

[NCperson]

@SonomaOak the question on BOTH the federal and MD state income tax form asks the question whether your dependent CAN be claimed by someone else.

Parents always have the option to claim or not claim their children.  Frankly, Federal and State would prefer you NOT claim these dependents as the tax due goes up! 

However, for the dependent, they do NOT have that option.  The question they are asked is CAN someone else claim them, not DID someone else claim them.  

look at the first line of the chart in Section 8 on page 10. it states: 

"Any person who can be claimed as a dependent on his or her parent’s (or any other person’s) federal return.....check the box for Dependent taxpayer Filing Status 6"

www.marylandtaxes.gov/forms/23_forms/Resident-Booklet.pdf

those are the rules. 

lastly, suggest not struggling with the logic of the approach.  simply,  that is the way the MD legislature passed the laws and it doesn't have to be logical.  Contact your legislative representative as necessary.  🙂 

[avjunior]

Yes @NCperson I think expecting logic here is difficult!  As you pointed out the MD instruction booklet for the resident return states "Any person who can be claimed...".  However the nonresident return instruction booklet states "If another taxpayer claims you as a dependent on their tax return, your filing status is dependent taxpayer."  This follows the differences between resident and nonresident in the MD code pointed out above.

And adding to this is both resident and nonresident forms have identical filing status sections where box 1 says "If you can be claimed on another person's tax return, use Filing Status 6."

[NCperson]

@avjunior if your daughter is away at college (whether within the state or outside the state), that is considered a temporary absence from home and she remains a "permanent resident" of your household; she is not a non-resident of MD. 

Rules are rules - suggest stop comparing and just finish the tax return :-).   The software will do it correctly.  Are you overthinking this? 

[Opus 17]

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@avjunior wrote:

And adding to this is both resident and nonresident forms have identical filing status sections where box 1 says "If you can be claimed on another person's tax return, use Filing Status 6."

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If you are using software, leave it alone.  The software programmers work with local tax law experts and each entity (state or IRS) will not allow the software to e-file unless it conforms to all their rules.

If you are preparing your return on paper, follow the forms and instructions.  Don't try to interpret the law, unless you are a lawyer, and are prepared to go to court to challenge the slight difference in wording you have uncovered.  If audited, you will lose from square one, and will be fighting an uphill battle all the way.

It is a simple fact that, across the federal Congress and state governments, tax benefits are rarely provided to someone who is supported by someone else.

We could ask, as a threshold matter, does your child qualify to be claimed as a dependent?  If she is a full-time student under age 24, the two salient questions are,

1. Does she live in your home, and

2. Does she support herself?

For the live at home question, being away at college is considered a temporary absence and she still "lives at home" for tax purposes.  However, sometimes a child will move out into their own apartment, and if they have no intention of returning to their parents home on summer break or after college, they can be considered to live away from home.  Intent is important.  Living in an apartment because it's cheaper than the dorm but you visit your parents over the summer does not show intention to move out of your parents home permanently.  But moving in with a fiancé or getting married, and taking most of your stuff out of your parents house, does demonstrate intent.  If the child lives (or is considered to live) in your home less than 183 days, and they have more than $4700 of taxable income, they don't qualify as a dependent.

For the support question, be aware that student loans taken out in the child's name counts as support they provide themself.  (However, scholarships are ignored for this support question.)   If you add up all the support the child provides themself (expenses paid from wages, savings, or loans) and compare them to the child's total cost of living (including room and board at college, room and board at your home over the summer, entertainment, travel, medical, clothing, tuition, books, etc, -- does the child provide more than half their own support.  If so, they don't qualify as your dependent.

Consider carefully if your child qualifies as a dependent.  But if she does, you just have to deal with the consequences.  

[avjunior]

@Opus 17   said "Consider carefully if your child qualifies as a dependent."

This is something I would have missed.  My child (20 years old at end of 2023) has an AGI on their 1040 of almost $21k from working.  Add to that college loans in their name.

It's not trivial to determine some of the support we provided such as letting the child use our credit card for shopping, being on our health plans (which are priced for 'family'), room+board for living here two months in the summer, etc.

[NCperson]

@avjunior this is the worksheet that assesses whether your child is providing over 50% of their support or not. 

if that $21k is going into the bank, I suspect she is a dependent.  

The test of dependency doesn't depend on income, it depends on who is covering the expense. She could be making a million dollars and still be your dependent if she doesn't use any of that money to support herself. 

Further, where is she living the other 10 months of the year?  if you are paying for that (apartment or dorm), that is part of YOUR support of her.

page 16

www.irs.gov/pub/irs-pdf/p501.pdf

[Opus 17]

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@avjunior wrote:

@Opus 17   said "Consider carefully if your child qualifies as a dependent."

This is something I would have missed.  My child (20 years old at end of 2023) has an AGI on their 1040 of almost $21k from working.  Add to that college loans in their name.

It's not trivial to determine some of the support we provided such as letting the child use our credit card for shopping, being on our health plans (which are priced for 'family'), room+board for living here two months in the summer, etc.

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Essentially, all the shared expenses are pro-rated.  If you have a family of 4, you would count 1/4 your household expense as part of her support (rent or mortgage, utilities, food), probably 1/4 the family health insurance.  You would need to count everything you pay for on the child's behalf (shopping, travel, entertainment, clothes).  Include any tuition or room and board you pay.  On the child's side, count anything they pay for, plus the loans in their name.  (But as mentioned, if their funds are going into savings, that is not going into providing for their support needs.)

It's hard for the kid to get over the hump of providing more than half their own support, when you consider the value of the housing you provide over summers, income differences, etc.  But it is possible, depending on the family, the tuition, and the amount of loans.  It might not add up in your case but it should at least be checked.  

[avjunior]

Thanks again to all the experts who replied on this thread (even though I didn't start it).  The turbotax community is incredible!

I emailed the MD tax helpline about what happens if a child is a dependent but not claimed on the parent's return.  This was the response I received today:

Thank you for contacting the Comptroller of Maryland.

If the dependent is not claimed on the parents’ Maryland Form 502, they may select the “Single” Filing Status (if that applies to them).  If the dependent is claimed on the parents’ Form 502, then the “Dependent taxpayer” Filing Status (Box 6) would apply.

[NCperson]

@avjunior let me ask you this question..and I will be BLUNT ....when the MD audit depart later inquires how your child completed the tax return, when the written instructions state you child is to use Filing Status 6 if the child CAN be claimed on your tax return, do you really think some email from some MD employee is going to trump the instruction booklet? 

This is like when Mom said "no", I used to go ask Dad.... and wait to see if Mom later scolds me!

It is YOUR CHILDs tax return - NOT yours!!!  They are the ones who will be taking that letter / phone call etc. from Audit.

Are you going to explain this to you child before they sign THEIR tax return - that THEY are not following the instructions? 

page 11

www.marylandtaxes.gov/forms/23_forms/Resident-Booklet.pdf

did you ask the State what the approach would be if the child CAN be claimed (but wasn't) or did you simply ask if they weren't claimed?  If the latter, did you ask a "loaded question" and received a "loaded answer" that doesn't reflect the true situation.  if they weren't claimed and can't be claimed, that is different than weren't claimed but CAN be claimed. 

are you going to email back and ask why their response varies with their own instruction booklet? I would.... because I would want my child to trust me with THEIR tax return.  🙂