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Standard Deduction and Personal,Dependency Amounts for Children Age 14 and Over or Students, June 28, 2006 1 (June 28, 2006)

handle is hein.tera/crstax0203 and id is 1 raw text is: Order Code RS20072 Updated June 28, 2006 CRS Report for Congress Received through the CRS Web Standard Deduction and Personal/Dependency Amounts for Children Age 14 and Over or Students Pamela J. Jackson Analyst in Public Sector Economics Government and Finance Division Summary Generally, a taxpayer is allowed one exemption for each person claimed as a dependent. The taxpayer can claim the dependent if the individual meets five tests for dependency. As a result of the Working Families Tax ReliefAct of 2004, the tests for certain dependents, children, were simplified when a uniform definition of a qualifying child was adopted. A taxpayer may claim dependency exemptions for children 19 through 23 years of age who are full-time students at least five months during the year. Between 1954 and 1986, it was possible for both a parent and his or her child or full-time student to claim the child's or student's personal/dependency exemption. Under a provision of the Tax Reform Act of 1986 (TRA86), if the parent claimed the exemption, the child or dependent student could not claim their own personal exemption. However, the TRA86 also provided a standard deduction for children/students equal to the greater of $500 or earned income up to the full standard deduction applicable to other types of taxpayers. These amounts have been adjusted annually for inflation. A provision included in the Taxpayer ReliefAct of1997(TRA97) preserved a full offset for earned income against the standard deduction amount but also provided a more generous offset where there is both earned and unearned income. Special tax rules commonly referred to as the kiddie tax apply to the unearned investment income of children under the age of 14. These rules were recently modified by the Tax Increase Prevention and Reconciliation Act (P.L. 109-222), which increased the age of minors subject to this tax to those minors under age 18. This report will be updated to reflect legislative changes and/or indexation adjustments. Congressional Research Service oe The Library of Congress

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