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Tax Benefits for Families: Changes in the Definition of a Child, March 10, 2006 1 (March 10, 2006)

handle is hein.tera/crstax0205 and id is 1 raw text is: Order Code RS22016 Updated March 10, 2006 CRS Report for Congress Received through the CRS Web Tax Benefits for Families: Changes in the Definition of a Child Christine Scott Specialist in Tax Economics Domestic Social Policy Division Summary Beginning with tax year 2005, there is a new definition of a child for tax purposes as a result of changes made by the Working Family Tax Relief Act of 2004 (P.L. 108- 311), and technical changes to this act made by the Gulf Opportunity Zone Act of 2005 (P.L. 109-135). The new definition affected taxpayers claiming certain tax provisions, including five tax benefits widely used by families - the personal exemption for dependents, the dependent care tax credit and exclusion for dependent care assistance programs, the child tax credit, the head of household filing status, and the earned income credit. P.L. 108-311 provided a more uniform definition of a child for these tax provisions. The changes provided specific requirements for an individual to be either a qualifying child or a qualifying relative for the personal exemption for dependents. The tax provisions used by families are linked to new definitions of a qualifying child or qualifying relative. For example, for the child credit, an individual must be a qualifying child under the new definitions and meet, as under the pre-2005 rules, the age limitation (17) and be claimed by the taxpayer as a dependent for the personal exemption. This report will be updated as warranted for legislative activity. Tax Years 2004 and Earlier For tax years 2004 and earlier, the two major definitions under which a child may qualify a taxpayer to claim a specific tax benefit were the definitions in the personal exemption and the earned income credit. A dependent for the personal exemption had to meet five requirements (or tests): Financial support (the taxpayer must provide more than 50% of the dependent's support); * Residency or relationship (the dependent must live with the taxpayer all of the tax year, or be related to the taxpayer); Congressional Research Service oe The Library of Congress

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