Claiming child as dependent who moved abroad for a work/school apprenticeship during the tax year

[maxheller]

Good afternoon,

My daughter moved to Germany on June 12, 2023 when she was still 17 years old. Until then, she lived at home with my spouse and myself. She will be 18 years old by 12/31/2023. I lived with her in Germany for 2 months together at my parents home until August 20, 2023. She started a business apprenticeship (3 days of work, 2 days of trade school) on August 1, 2023, earning about $6,000 until the end of 2023. I have provided 100% of her financial support during her time in the U.S. and during my time in Germany 1/1/2023 until 8/21/2023. Thereafter, she mostly supported herself with the income she is making.

Can I claim her as dependent on my 2023 tax return (joint return together with my spouse)? 

Thanks.

[DoninGA]

If her absence from your home is only temporary for education purposes then you should be able to claim her on your 2023 tax return under the Qualifying Child rules.

To be a Qualifying Child -

1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student or (c) any age and permanently and totally disabled.
3. The child must have lived with you for more than half of the year. Temporary absences while away for education are considered living with you.
4. The child must not have provided more than half of his or her own support for the year.
5. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child.
6. The child must be a U.S. citizen or U.S., Canada or Mexico resident for some portion of the year.
7. The child must be younger than you unless disabled.

[maxheller]

Thank you very much for your response.

My follow-up question would be on what is considered a "temporary absence". The apprenticeship / trade school she is attending will officially end in February 2025 when she will be awarded an official certificate of completion. She may or may not return to the U.S. after the apprenticeship is completed. Would it be sufficient to establish a temporary absence on this basis of her mere intent to return to the U.S. for college thereafter? Or are there hard criteria to establish a temporary absence?

Thanks again.

[BillM223]

For 2023, she did not support herself (over 50%), and since she is away for educational purposes, it appears that she would be your dependent for this year. For temporary absence, the IRS says

Temporary absences.

You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, military service, or detention in a juvenile facility. It must be reasonable to assume the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence. (from Pub 501).

Part of the test is her intention to return to the US when she is finished with the education. If she intends to stay in Germany indefinitely, then she is considered to have changed her domicile, so would no longer be considered as on a "temporary absence".

However, if she provides more than half her support in 2024 and 2025, she would no longer qualify as a dependent.

[Opus 17 · Accepted solution]

You have no problems for 2023, given that she lived in the US more than half the year, and did not pay more than half her own support (when considered over the entire year).

For 2024 and 2025, the question of whether she is temporally away but considered to live at home, depends on her demonstrated intent to return home or remain in Germany, which is not known yet (you said "may or may not".). And even if intent to stay in Germany is still undetermined by the end of 2024, her income might defeat the dependency test for 2024.  But you can figure that out when the time comes.

Your daughter should also be reminded that as a US citizen, she must file a US tax return and pay US tax on all her world-wide income, even if she is living and working overseas.  She can claim a credit on her US tax return for taxes she pays to Germany on the same income.  Her US tax return is filed according to US tax law, regardless of how her income is taxed Germany.