I have two dependents but I live with my parents who pay the mortgage. Should I let my dad claim my daughters so that he gets the child tax credit instead of me?

[DianeW777]

It depends. It sounds like you do not qualify for head of household since your father pays the mortgage, although single would still allow the credits. And it also sounds like either of you may qualify, see the rules below and the Tie Breaker rules to make your decision. You can also test it on each return if you meet the requirements below and the other parent does not life with you and the children.

Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Although the child is a qualifying child of each of these persons, generally only one person can actually treat the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit).

• The child tax credit, credit for other dependents, or additional child tax credit.
• Head of household filing status.
• The credit for child and dependent care expenses.
• The exclusion from income for dependent care benefits.
• The earned income credit.

The other person can’t take any of these benefits based on this qualifying child. In other words, you and the other person can’t agree to divide these tax benefits between you.

Tiebreaker rules.

To determine which person can treat the child as a qualifying child to claim these five tax benefits, the following tiebreaker rules apply. For purposes of these tiebreaker rules, the term “parent” means a biological or adoptive parent of an individual. It does not include a stepparent or foster parent unless that person has adopted the individual.

• If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent.
• If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents.
• If the parents don't file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher AGI for the year.
• If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year.
• If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child.

Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child.

See the example of a parent and grandparent both eligible in Example 1:  IRS Publication 501

• Example 1—child lived with parent and grandparent.  You and your 3-year-old child J lived with your parent all year. You are 25 years old and unmarried, and your AGI is $9,000. Your parent's AGI is $15,000. Your child’s other parent didn't live with you or your child. You haven't signed Form 8832 (or a similar statement).  J is a qualifying child of both you and your parent because J meets the relationship, age, residency, support, and joint return tests for both you and your parent. However, only one of you can claim J. J isn't a qualifying child of anyone else, including J’s other parent. You agree to let your parent claim J. This means your parent can claim J as a qualifying child for all of the five tax benefits listed earlier, if your parent qualifies for each of those benefits (and if you don't claim J as a qualifying child for any of those tax benefits).