We have third party custody of a non relative child...

[krazystarz]

We have third party custody of a non relative child in the state of Washington. We've had her since mid March, so we definitely should be claiming her on our taxes. How do we go about this? We are the custodial parents according to the courts, but she's not a relative and not technically a foster child either.  What do I select as dependency on TurboTax as I'm starting to prep our 2019 taxes. Thank you for the help.

[rjs]

You cannot claim the child as a dependent. The court's granting of custody does not override the federal tax laws. In order to claim someone who is not related to you as a dependent, the person has to live with you for the entire year - all 365 days. If she were an actual foster child she would be considered a relative, the same as your own child. But in the situation that you described you cannot claim her as a dependent.

[krazystarz]

@rjs So next year,  we will be able to claim her, since she'llbe with us all 12 months? She's with us now until she's 18.

[Carl]

Just to provide a bit more clarity here, understand that federal taxes are governed by federal laws. The court that awarded you custody is not a federal court. It's a state court or lower. So with that clarified;

Federal law states that for a non-related person to qualify as your dependent, they must have lived in your household the entire year. The only legal entity that can "over ride" that rule in your favor would be a federal judge. Since federal courts do not deal with divorce, separation or custody cases I am 100% confident that will never happen. So regardless of what a lower court says and regardless of what lower level laws (such as state laws) may say, it flat out can not over ride federal law. Period.

But if your state taxes personal income your state laws "may" allow you to claim the dependent on your state tax return. But you flat out can not claim the dependent on your federal return.

[Anonymous]

a qualifying relative is a person who is not a qualifying child of anyone else 

the parents or parents would not meet all the tests required for the child to be a qualifying child.

here is a test they would likely fail

residency - the child must have the same principal residence residence as the taxpayer (parent(s)) for more than half the year.    since it would seem the child is living with you, the parent(s) would fail this test  (2020)

 there are  six tests all of which must be met for the child to be a qualifying child.   even if only one test is failed, the child would not be a qualifying child.  Thus the tests for qualifying relative (really a misnomer because the person does not have to be a relative)  must be checked

1) member of household or relationship

either related which the child is not or the child must live in your household for the entire year - temporary absences allowed

2) gross income for the year must be below a certain amount for 2019 this amount is $4200 (don't know amount for 2020)   generally gross income is the same as taxable income

3) you must provide over  1/2 the child's support.  if the parent(s) are providing over 1/2's the child support then you fail this test

it is possible that no party can claim the child because each party fails one or more tests.

say you do meet all 3 tests for qualifying relative.   I want to warn you that nothing can stop the parents from claiming the child.    in this situation the IRS will first send both parties a letter asking them to amend.  if they don't and you shouldn't.   then the IRS sends a second letter asking you to prove it.   if this happens you will have to prove you meet the three tests.  

[krazystarz]

@Anonymous  We would definitely meet all 3 tests. Her mom and the social worker both approved us and placed her with us in March. She just isn't technically foster.

[rjs]

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@Anonymous wrote:

2) gross income for the year must be below a certain amount for 2019 this amount is $4200 (don't know amount for 2020)  

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The gross income limit for a qualifying relative in 2020 is $4,300.