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2018 taxes: Gross income amount for qualifying relative?
Old 08-25-2018, 09:07 PM   #1
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2018 taxes: Gross income amount for qualifying relative?

Hi,

I'm looking at the 2017 Pub 501 and doing some 2018 tax planning. I'm trying to figure out if my son will be my dependent for 2018.

Facts related to qualifying child:

1. He is my biological son.
2. He turned 23 in February 2018.
3. He worked full time the first four months of 2018 and will be a part-time university student the last six months of the 2018.
4. He will live with me all of 2018.
5. I provided more than half of his support.
6. He will not be filing a joint return.

Because of the "part-time" qualifier in item 3, I don't believe he will qualify as my qualifying child in 2018.

On to qualifying relative, I come across the third qualification:

"The person's gross income for the year must be less than $4,050."

Does anyone know what the $4,050 number will be for 2018? It seems to be tied to the relevant dependent exemption amount, but dependent exemptions no longer exist due to the TCJA. I found one web page that claimed it will be $4,150 due to inflation, but that seems like too high of an inflation rate.

Thanks.
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Old 08-26-2018, 07:09 AM   #2
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Agree w/ all your reasoning. Saw one Intuit article that had the same number
(4150) you mentioned. Don't really know how to read this table but it looks like inflation numbers in the 2% range so that wouldn't be too far off
https://www.bls.gov/news.release/cpi.t05.htm

w/ , w/o that non-child credit......difference is "only" $500 so that's the uncertainty in your calculation?
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Old 08-26-2018, 07:14 AM   #3
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Remember they round those numbers to the nearest $50 so it could be that it really went from $4,074 to $4,126 but rounded that was $4,050 to $4,150.
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Old 08-26-2018, 07:31 AM   #4
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Perhaps I am wrong but I thought the dependent exemption deduction was eliminated for 2018.
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Old 08-26-2018, 07:37 AM   #5
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Quote:
Originally Posted by SecondCor521 View Post
Hi,

I'm looking at the 2017 Pub 501 and doing some 2018 tax planning. I'm trying to figure out if my son will be my dependent for 2018.

Facts related to qualifying child:

1. He is my biological son.
2. He turned 23 in February 2018.
3. He worked full time the first four months of 2018 and will be a part-time university student the last six months of the 2018.
4. He will live with me all of 2018.
5. I provided more than half of his support.
6. He will not be filing a joint return.

Because of the "part-time" qualifier in item 3, I don't believe he will qualify as my qualifying child in 2018.

On to qualifying relative, I come across the third qualification:

"The person's gross income for the year must be less than $4,050."

Does anyone know what the $4,050 number will be for 2018? It seems to be tied to the relevant dependent exemption amount, but dependent exemptions no longer exist due to the TCJA. I found one web page that claimed it will be $4,150 due to inflation, but that seems like too high of an inflation rate.

Thanks.
The $4,150 is correct. The definition of a full time student is pretty liberal so double check to be sure it is part time schooling.
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Old 08-26-2018, 08:02 AM   #6
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As I read the full-time student definition, it was procipally based on whether the educational institution that the student is attending classifies them as a full-time student.
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Old 08-26-2018, 08:13 AM   #7
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Originally Posted by phil1ben View Post
Perhaps I am wrong but I thought the dependent exemption deduction was eliminated for 2018.
$500 Non-Child Dependent or Flexible Credit in Trump/GOP Tax Reform Bill | Saving to Invest

exemption replaced by enhanced CTC or this for other non-"child" dependents
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Old 08-26-2018, 08:34 AM   #8
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To be conservative, I am just using the 4,050 as the reference number.
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Old 08-26-2018, 09:21 AM   #9
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Originally Posted by phil1ben View Post
Perhaps I am wrong but I thought the dependent exemption deduction was eliminated for 2018.
You are correct. If someone has qualifying relatives that they are helping out with medical expenses, that could affect being able to reimburse from an HSA for those medical expenses.
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Old 08-26-2018, 09:31 AM   #10
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You are correct. If someone has qualifying relatives that they are helping out with medical expenses, that could affect being able to reimburse from an HSA for those medical expenses.
Why? Aren't they still qualifying relatives/dependents?
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Old 08-26-2018, 10:30 AM   #11
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Looks like OP is out of luck.

Quote:
$500 credit for dependents who are ineligible for child tax credit

For 2018-2025, the TCJA establishes a new $500 credit for dependents who are not under-age-17 children who qualify for the $2,000 child credit.

For example, qualifying dependents can include: (1) a dependent child who lives with you for over half the year and is over age 16 and up to age 23 if he or she is a student and (2) a host of non-child relatives (grandchild, sibling, stepbrother, stepsister, father, mother, grandfather, grandmother, stepfather, stepmother, niece, nephew, uncle, aunt, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law, and others).

Apparently, these non-child relatives will only qualify for the $500 credit if they have no gross income for the year, because the tax-law language says they cannot have gross income in excess of the dependent exemption deduction amount. For 2018-2025, the dependent exemption deduction is deemed to still exist, but it equals $0. In addition, all these folks would also have to receive over half of their support for the year from you and be a U.S. citizen, U.S. national, or U.S. resident. Individuals who are not relatives can also be qualifying dependents if they meet the preceding requirements and live with you as a member of your household for the year.

Observation: The apparent requirement that non-child dependent cannot have any gross income to be eligible for the $500 credit might be a legislative oversight where the drafter of the provision failed to take into account the fact that the dependent exemption for 2018-2025 is $0. If it’s not an oversight, eligibility for the $500 credit will be a rarity.
https://www.marketwatch.com/story/ha...you-2018-02-21
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Old 08-26-2018, 11:04 AM   #12
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Wow, didn't know about the zero income aspect for the 500 credit. Will still get the dependent exemption.
I will be checking with my tax guy as to his thoughts.

Thanks pb4uski for the detailed information provision as always.
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Old 08-26-2018, 11:12 AM   #13
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Originally Posted by kaneohe View Post
Why? Aren't they still qualifying relatives/dependents?
Yes, my point was that if they're considered qualifying relatives for dependency purposes, you would be able to reimburse yourself from your HSA for medical expenses you pay on their behalf. Otherwise, no.

Just one reason that one might still need to know if someone would be considered qualifying, even though exemptions have gone away.
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Old 08-26-2018, 11:33 AM   #14
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Thanks everyone. As per usual, I left out an important part of the story.

The reason I am trying to figure this out is that I believe this same son does qualify for the American Opportunity Tax Credit. I will be filing a tax return, and so will he. The next question then is who claims the AOTC on their return - me or him? Looking at the instructions for Form 8863, it centers on whether or not he is my dependent.

Either way, we're probably only getting the refundable portion and not the whole AOTC. That's OK.

Whether or not he is my dependent depends on whether or not he is my qualifying child (he isn't) and whether or not he is my qualifying relative (seems to hinge on gross income).

I'd rather he *not* be my dependent, because if he is, then I am pretty certain that I would have to include his income on my ACA PTC Form 8962 line 2b. That could sort of mess up my plans for my ACA PTC.

If pb4uski's quoted article's logic applies in this case, then we are home free - my son made about $4,000 this year and $4,000 >> $0. If not - the tax laws are full of inconsistencies - then I want to make sure he makes above whatever the number is. Since he made just about $4,000, if the number turns out to be $4,050 I am thinking I need to pay him $55 to mow my lawn or something before the end of the calendar year.

Thanks all!
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Old 08-26-2018, 11:41 AM   #15
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Originally Posted by pb4uski View Post
It'll be interesting to see if this is actually the case.

Fortunately, my DS is a full time student this year and next. But, his senior year he might not be. His dependency not only affects the $500 credit, but also my ability to take the Lifetime Learning Credit his Senior year (he'll have used up his 4 years of AOP credit by then).
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Old 08-26-2018, 12:10 PM   #16
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Our kids are long out of the nest so I really don't pay much attention to this, but you are right.... it is interesting... I would hope that they would reinstate the old incoem limittion rather than $0 as the article suggests is the case.
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Old 08-26-2018, 12:16 PM   #17
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You might want to check out the the table and the footnotes on p. J4 here
https://www.irs.gov/pub/irs-pdf/p4012.pdf
related to AOTC.
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Old 08-26-2018, 02:39 PM   #18
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Originally Posted by kaneohe View Post
You might want to check out the the table and the footnotes on p. J4 here
https://www.irs.gov/pub/irs-pdf/p4012.pdf
related to AOTC.
Thanks for the pointer to this article.

Fortunately for us, I think, is that he is only a part time student for 2018, so he does not meet the 1(c) criteria in that footnote.

Further on, the spreadsheet on page J-9 confirms this. His answers to questions 1 through 3 would be Yes, Yes, and No, respectively.
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Old 08-27-2018, 03:14 PM   #19
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If not - the tax laws are full of inconsistencies - then I want to make sure he makes above whatever the number is. Since he made just about $4,000, if the number turns out to be $4,050 I am thinking I need to pay him $55 to mow my lawn or something before the end of the calendar year.
Followup: Turns out he made about $4.5K, so we're in the situation that I think is best for us this year.
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