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Excemptions, Standard Deductions and Filing Information

501 15000U Exemptions, Standard Deduction, and Filing Information What's New for 20051 Reminders2 Introduction2 Who Must File2 Who Should File4 Filing Status5 Exemptions9 Exemptions for Dependents10 Phaseout of Exemptions19 Standard Deduction19 2005 Standard Deduction Tables22 How To Get Tax Help23 Index25 What's New for 2005 Exemption for dependent.

Beginning in 2005, you will use new rules to determine whether you can claim an exemption for a dependent. You can claim an exemption for a qualifying child or a qualifying relative. See Exemptions for Dependents.

Head of household filing status.

Beginning in 2005, you will use new rules to determine whether someone is your qualifying person so you can claim head of household filing status. To be your qualifying person, a child generally must be your qualifying child. See Head of Household.

Who must file. Filing requirements: What's New for 2005 Filing requirements: Who must file What's New for 2005 Who must file Tax returns: Who must file

Generally, the amount of income you can receive before you must file a return has increased. Table 1 shows the filing requirements for most taxpayers.

Exemption amount. Exemptions: Amount What's New for 2005 What's New for 2005: Exemption amount

The amount you can deduct for each exemption has increased from $3,100 in 2004 to $3,200 in 2005.

Exemption for individual displaced by Hurricane Katrina.

You may be able to claim a $500 exemption if you provided housing to a person displaced by Hurricane Katrina. For details, see Exemption for Individual Displaced by Hurricane Katrina.

Exemption phaseout. Exemptions: Phaseout What's New for 2005: Exemption phaseout Personal exemption: What's New for 2005 Personal exemption: Phaseout Phaseout of exemptions

You lose all or part of the benefit of your exemptions if your adjusted gross income is above a certain amount. The amount at which this phaseout begins depends on your filing status. For 2005, the phaseout begins at $109,475 for married persons filing separately; $145,950 for single individuals; $182,450 for heads of household; and $218,950 for married persons filing jointly or qualifying widow(er)s. See Phaseout of Exemptions, later.

Standard deduction. Important changes: Standard deduction Standard deduction: What's New for 2005

The standard deduction for most taxpayers who do not itemize deductions on Schedule A of Form 1040 is higher in 2005 than it was in 2004. The amount depends on your filing status. The 2005 Standard Deduction Tables are shown near the end of this publication as Tables 7, 8, and 9.

Itemized deductions. What's New for 2005: Limit on itemized deduction Itemized deductions: Limits on Itemized deductions: Limits on: What's New for 2005 Limit on itemized deductions: What's New for 2005

Some of your itemized deductions may be limited if your adjusted gross income is more than $145,950 ($72,975 if you are married filing separately). See Who Should Itemize, later.

Reminders Election to report child's unearned income on parent's return. Children Dividends of this heading: Investment income of child under age 14 Children: Investment income of child under age 14 Children: Investment income of child under age 14: Parents' election to report on Form 8814 Dependents: Child's earnings: Children, subheading: Investment income of child under age 14 Form 8814: Parents' election to report child's interest and dividends Unearned income of child Children, subheading: Investment income of child under age 14

You may be able to include your child's interest and dividend income on your tax return by using Form 8814, Parents' Election To Report Child's Interest and Dividends. If you choose to do this, your child will not have to file a return.

Photographs of missing children. Missing children: Photographs of, included in IRS publications Photographs: Missing children, included in IRS publications

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

This publication discusses some tax rules that affect every person who may have to file a federal income tax return. It answers some basic questions: who must file; who should file; what filing status to use; how many exemptions to claim; and the amount of the standard deduction.

The first section of this publication explains who must file an income tax return. If you have little or no gross income, reading this section will help you decide if you have to file a return.

<ROM>Table 1.</ROM> 2005 Filing Requirements Chart for Most Taxpayers IF your filing status is... AND at the end of 2005 you were... ^* THEN file a return if your gross income was at least... ^** single under 65 $ 8,200 65 or older $ 9,450 head of household under 65 $10,500 65 or older $11,750 married, filing jointly ^*** under 65 (both spouses) $16,400 65 or older (one spouse) $17,400 65 or older (both spouses) $18,400 married, filing separately any age $ 3,200 qualifying widow(er) with dependent child under 65 $13,200 65 or older $14,200

Age: Gross income and filing requirements (Table 1) Filing requirements: Generally (Table 1) Filing requirements: Gross income levels (Table 1) Gross income: Defined: Filing requirements (Table 1) Head of household: Filing requirements (Table 1) Single taxpayers: Gross income filing requirements (Table 1) Surviving spouse: Gross income filing requirements (Table 1) Tables and figures: Filing requirements: Gross income levels (Table 1) * If you were born before January 2, 1941, you are considered to be 65 or older at the end of 2005. ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you may exclude part or all of it). Do not include social security benefits unless you are married filing a separate return and you lived with your spouse at any time during 2005. *** If you didn't live with your spouse at the end of 2005 (or on the date your spouse died) and your gross income was at least $3,200, you must file a return regardless of your age.

The second section is about who should file a return. Reading this section will help you decide if you should file a return, even if you are not required to do so.

The third section helps you determine which filing status to use. Filing status is important in determining whether you must file a return, your standard deduction, and your tax rate. It also helps determine what credits you may be entitled to.

The fourth section discusses exemptions, which reduce your taxable income.

The fifth section is about exemptions for dependents. It explains the difference between a qualifying child and a qualifying relative. Other topics include the social security number requirement for dependents, the rules for multiple support agreements, and the rules for divorced or separated parents.

The sixth section gives the rules and dollar amounts for the standard deduction — a benefit for taxpayers who do not itemize their deductions. This section also discusses the standard deduction for taxpayers who are blind or age 65 or older, and special rules for dependents. In addition, this section should help you decide whether you would be better off taking the standard deduction or itemizing your deductions.

The last section explains how to get tax help from the IRS.

This publication is for U.S. citizens and resident aliens only. If you are a resident alien for the entire year, you must follow the same tax rules that apply to U.S. citizens. The rules to determine if you are a resident or nonresident alien are discussed in chapter 1 of Publication 519, U.S. Tax Guide for Aliens.

Nonresident aliens. Aliens Nonresident Nonresident aliens Nonresident aliens

If you were a nonresident alien at any time during the year, the rules and tax forms that apply to you may be different from those that apply to U.S. citizens. See Publication 519.

Comments and suggestions. Comments on publication Suggestions for publication

We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address: Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. NW, IR-6406 Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put Publications Comment on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Tax questions.

If you have a tax question, visit www.irs.gov or call 1-800-829-1040. We cannot answer tax questions at either of the addresses listed above.

Ordering forms and publications.

Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the National Distribution Center at the address shown under How To Get Tax Help in the back of this publication.

Publication 559 Survivors, Executors, and Administrators 929 Tax Rules for Children and Dependents Form (and Instructions) Amended U.S. Individual Income Tax Return Power of Attorney and Declaration of Representative Release of Claim to Exemption for Child of Divorced or Separated Parents Parents' Election To Report Child's Interest and Dividends Exemption Amount for Taxpayers Housing Individuals Displaced by Hurricane Katrina Who Must File Filing requirements: Who must file Tax returns: Who must file

If you are a U.S. citizen or resident, whether you must file a federal income tax return depends upon your gross income, your filing status, your age, and whether you are a dependent. For details, see Table 1 and Table 2. You also must file if one of the situations described in Table 3 applies. The filing requirements apply even if you owe no tax.

Filing requirements: Penalty for failure to file Penalties: Failure to fileYou may have to pay a penalty if you are required to file a return but fail to. If you willfully fail to file a return, you may be subject to criminal prosecution.

For information on what form to use — Form 1040EZ, Form 1040A, or Form 1040 — see the instructions in your tax package.

Gross income. Gross income: Defined

Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from tax. If you are married and live with your spouse in a community property state, half of any income defined by state law as community income may be considered yours. For a list of community property states, see Community property states under Married Filing Separately, later.

Self-employed persons. Gross income: Self-employed persons Self-employed persons: Gross income

If you are self-employed in a business that provides services (where products are not a factor), your gross income from that business is the gross receipts. If you are self-employed in a business involving manufacturing, merchandising, or mining, your gross income from that business is the total sales minus the cost of goods sold. To this figure, you add any income from investments and from incidental or outside operations or sources.

You must file Form 1040 if you owe any self-employment tax.

Filing status. Filing status: Determination of

Your filing status generally depends on whether you are single or married. In some cases, it depends on other factors as well. Whether you are single or married is determined as of the last day of your tax year, which is December 31 for most taxpayers. Filing status is discussed in detail later in this publication.

Age. Age: Filing status determination Filing status: Age 65 and older

Age is a factor in determining if you must file a return only if you are 65 or older at the end of your tax year. For 2005, you are 65 or older if you were born before January 2, 1941.

Filing Requirements for Most Taxpayers Filing requirements: Who must file Tax returns: Who must file

You must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1. Dependents should see Table 2 instead.

Deceased Persons Decedents: Filing requirements Filing requirements: Deceased taxpayer

You must file an income tax return for a decedent (a person who died) if both of the following are true.

You are the surviving spouse, executor, administrator, or legal representative.

The decedent met the filing requirements described in this publication at the time of his or her death.

For more information, see Final Return for Decedent in Publication 559.

<ROM>Table 2.</ROM> <IMARK>2005 Filing Requirements for Dependents See Exemptions for Dependents to find out if you are a dependent. If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. In this table, unearned income includes taxable interest, ordinary dividends, and capital gain distributions. Earned income includes wages, tips, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income. Caution: If your gross income was $3,200 or more, you usually cannot be claimed as a dependent unless you are a qualifying child. For details, see Exemptions for Dependents. Single dependents— Were you either age 65 or older or blind? □ No. You must file a return if any of the following apply.

Your unearned income was more than $800.

Your earned income was more than $5,000.

Your gross income was more than the larger of —

$800, or

Your earned income (up to $4,750) plus $250.

□ Yes. You must file a return if any of the following apply.

Your unearned income was more than $2,050 ($3,300 if 65 or older and blind).

Your earned income was more than $6,250 ($7,500 if 65 or older and blind).

Your gross income was more than $1,250 ($2,500 if 65 or older and blind) plus the larger of:

$800, or

Your earned income (up to $4,750) plus $250.

Married dependents—Were you either age 65 or older or blind? □ No. You must file a return if any of the following apply.

Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.

Your unearned income was more than $800.

Your earned income was more than $5,000.

Your gross income was more than the larger of —

$800, or

Your earned income (up to $4,750) plus $250.

□ Yes. You must file a return if any of the following apply.

Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.

Your unearned income was more than $1,800 ($2,800 if 65 or older and blind).

Your earned income was more than $6,000 ($7,000 if 65 or older and blind).

Your gross income was more than $1,000 ($2,000 if 65 or older and blind) plus the larger of:

$800 or

Your earned income (up to $4,750) plus $250.

Children: Filing requirements as dependents (Table 2) Children: Investment income of child under age 14: Dependent filing requirements (Table 2) Dependents: Filing requirements: Earned income, unearned income, and gross income levels (Table 2) Earned income: Dependent filing requirements (Table 2) Figures Tables and figures Filing requirements: Dependents: Table 2 Gross income: Dependent filing requirements (Table 2) Tables and figures: Filing requirements: Dependents (Table 2)

U.S. Citizens or Residents Living Abroad Abroad, citizens traveling or working: Filing requirements American citizens abroad Citizens outside U.S.: Filing requirements Filing requirements: Citizens outside U.S. Foreign employment: Citizens outside U.S., filing requirements Overseas taxpayers Tax returns Filing of Filing requirements U.S. citizens abroad: Filing requirements

For purposes of determining whether you must file a return, you must include in your gross income all of the income you earned abroad, including any income you can exclude under the foreign earned income exclusion. For more information on special tax rules that may apply to you, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Residents of Puerto Rico Filing requirements: Puerto Rico, residents of Puerto Rico: Residents of

Generally, if you are a U.S. citizen and a bona fide resident of Puerto Rico, you must file a U.S. income tax return if you meet the income requirements. This is in addition to any legal requirement you may have to file an income tax return with Puerto Rico.

If you are a bona fide resident of Puerto Rico for the whole year, your U.S. gross income does not include income from sources within Puerto Rico. However, include in your U.S. gross income any income you received for your services as an employee of the United States or any U.S. agency. If you receive income from Puerto Rican sources that is not subject to U.S. tax, you must reduce your standard deduction, which reduces the amount of income you can have before you must file a U.S. income tax return.

For more information, see Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

Individuals With Income From U.S. Possessions U.S. possessions: Income from

If you had income from Guam, the Commonwealth of Northern Mariana Islands, American Samoa, or the U. S. Virgin Islands, special rules may apply when determining whether you must file a U.S. federal income tax return. In addition, you may have to file a return with the individual island government. See Publication 570 for more information.

Dependents Dependents: Filing requirements Filing requirements: Dependents

A person who is a dependent may still have to file a return. This depends on the amount of the dependent's earned income, unearned income, and gross income. For details, see Table 2. A dependent may also have to file if one of the situations described in Table 3 applies.

Responsibility of parent.

If a dependent child who must file an income tax return cannot file it for any reason, such as age, a parent, guardian, or other legally responsible person must file it for the child. If the child cannot sign the return, the parent or guardian must sign the child's name followed by the words By (your signature), parent for minor child.

Earned income. Dependents: Earned income

ScholarshipsThis is salaries, wages, professional fees, and other amounts received as pay for work you actually perform. Earned income (only for purposes of filing requirements and the standard deduction) also includes any part of a scholarship that you must include in your gross income. See chapter 1 of Publication 970, Tax Benefits for Education, for more information on taxable and nontaxable scholarships.

Child's earnings. Dependents: Child's earnings

Amounts a child earns by performing services are his or her gross income. This is true even if under local law the child's parents have the right to the earnings and may actually have received them. If the child does not pay the tax due on this income, the parent is liable for the tax.

Unearned income. Children Dividends of this heading: Investment income of child under age 14 Children: Investment income of child under age 14 Children: Investment income of child under age 14: Interest and dividends Dependents: Unearned income

This is income such as interest, dividends, and capital gains. Trust distributions of interest, dividends, capital gains, and survivor annuities are considered unearned income also.

Election to report child's unearned income on parent's return.

Children: Investment income of child under age 14: Parents' election to report on Form 8814 Form 8814: Parents' election to report child's interest and dividendsYou may be able to include your child's interest and dividend income on your tax return. If you choose to do this, your child will not have to file a return. However, all of the following conditions must be met.

Your child was under age 14 at the end of 2005. (A child born on January 1, 1992, is considered to be age 14 at the end of 2005; you cannot make the election for this child.)

Your child is required to file a return for 2005 unless you make this election.

Your child had gross income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).

The interest and dividend income was less than $8,000.

No estimated tax payment was made for 2005 and no 2004 overpayment was applied to 2005 under your child's name and social security number.

No federal income tax was withheld from your child's income under the backup withholding rules.

You are the parent whose return must be used when making the election to report your child's unearned income.

For more information, see Parent's Election To Report Child's Interest and Dividends in Publication 929, and Form 8814.

Other Situations

You may have to file a tax return even if your gross income is less than the amount shown in Table 1 or Table 2 for your filing status. See Table 3 for those other situations when you must file.

<ROM>Table 3.</ROM> Other Situations When You Must File a 2005 Return If any of the four conditions listed below applied to you for 2005, you must file a return. 1. You owe any special taxes, such as: • Alternative minimum tax. (See the Form 1040 instructions for line 45.) • Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. (See Publication 590, Individual Retirement Arrangements (IRAs), and Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.) But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. • Social security or Medicare tax on tips you did not report to your employer. (See Publication 531, Reporting Tip Income.) • Write-in taxes, including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance. (See Publication 531 and the Form 1040 instructions for line 63.) • Household employment taxes. But if you are filing a return only because you owe these taxes, you can file Schedule H by itself. • Recapture taxes. (See the Form 1040 instructions for lines 44 and 62.) 2. You received any advance earned income credit (EIC) payments from your employer. These payments should be shown in box 9 of your Form W–2. (See Publication 596, Earned Income Credit.) 3. You had net earnings from self-employment of at least $400. (See Schedule SE (Form 1040) and its instructions.) 4. You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. (See Schedule SE (Form 1040) and its instructions.)

Advance earned income credit: Filing requirements (Table 3) Alternative minimum tax (AMT): Filing requirements (Table 3) Church employees: Filing requirements (Table 3) Earned income credit: Advance filing requirements (Table 3) Filing requirements: Other situations requiring filing (Table 3) Group-term life insurance: Uncollected social security/Medicare taxes: Reporting of (Table 3) Individual retirement arrangements (IRAs): Filing requirements (Table 3) Medical savings accounts (MSAs): Filing requirements (Table 3) Recapture taxes Self-employed persons: Filing requirements (Table 3) Social security and Medicare taxes: Reporting of (Table 3) Tables and figures: Filing requirements: Other situations requiring filing (Table 3) Tips: Reporting of (Table 3)

Who Should File Filing requirements: Who must file Tax returns: Who must file

Even if you do not have to file, you should file a tax return if you can get money back. For example, you should file if one of the following applies.

You had income tax withheld from your pay.

You made estimated tax payments for the year or had any of your overpayment for last year applied to this year's estimated tax.

You qualify for the earned income credit. See Publication 596, Earned Income Credit (EIC), for more information.

You qualify for the additional child tax credit. See the instructions in your tax forms package for more information on this credit.

You qualify for the health coverage tax credit. For information about this credit, see Form 8885, Health Coverage Tax Credit.

Filing Status Filing status: Determination of Filing status

You must determine your filing status before you can determine your filing requirements, standard deduction (discussed later), and correct tax. You figure your correct tax by using the Tax Computation Worksheet or the column in the Tax Table that applies to your filing status.

You also use your filing status in determining whether you are eligible to claim certain other deductions and credits.

There are five filing statuses:

Single,

Married Filing Jointly,

Married Filing Separately,

Head of Household, and

Qualifying Widow(er) With Dependent Child.

If more than one filing status applies to you, choose the one that will give you the lowest tax.

Marital Status Filing status: Marital status, determination of Marital status: Determination of

In general, your filing status depends on whether you are considered unmarried or married. A marriage means only a legal union between a man and a woman as husband and wife.

Unmarried persons. Filing status Unmarried persons Single taxpayers Single taxpayers: Filing status Unmarried persons Single taxpayers

You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree.

State law governs whether you are married or legally separated under a divorce or separate maintenance decree.

Divorced persons. Divorced taxpayers: Filing status

If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year.

Divorce and remarriage. Divorced taxpayers: Filing status: Divorce and remarriage to same person Remarriage after divorce

If you obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intended to and did remarry each other in the next tax year, you and your spouse must file as married individuals.

Annulled marriages. Annulled marriages: Filing status Filing status: Annulled marriages

If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint returns for earlier years. You must file amended returns (Form 1040X) claiming single or head of household status for all tax years affected by the annulment that are not closed by the statute of limitations for filing a tax return. The statute of limitations generally does not expire until 3 years after your original return was filed.

Head of household or qualifying widow(er) with dependent child. Filing status: Head of household Head of household: Qualifying person to file as Head of household: Qualifying surviving spouse with dependent child

If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child. See Head of Household and Qualifying Widow(er) With Dependent Child to see if you qualify.

Married persons. Married taxpayers: Filing status

If you are considered married for the whole year, you and your spouse can file a joint return, or you can file separate returns.

Considered married. Separated taxpayers: Filing status

You are considered married for the whole year if on the last day of your tax year you and your spouse meet any one of the following tests.

You are married and living together as husband and wife.

You are living together in a common law marriage that is recognized in the state where you now live or in the state where the common law marriage began.

Common law marriage

You are married and living apart, but not legally separated under a decree of divorce or separate maintenance.

Separated taxpayers: Living apart but not legally separated

You are separated under an interlocutory (not final) decree of divorce. For purposes of filing a joint return, you are not considered divorced.

Spouse died during the year. Death: Of spouse Decedents: Death of spouse Surviving spouse Death of spouse Death of spouse

If your spouse died during the year, you are considered married for the whole year for filing status purposes.

If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child.

If you remarried before the end of the tax year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year.

Married persons living apart. Separated taxpayers: Filing status

If you live apart from your spouse and meet certain tests, you may be considered unmarried. If this applies to you, you can file as head of household even though you are not divorced or legally separated. If you qualify to file as head of household instead of as married filing separately, your standard deduction will be higher. Also, your tax may be lower, and you may be able to claim the earned income credit. See Head of Household, later.

Single Single taxpayers: Filing status

Your filing status is single if, on the last day of the year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree, and you do not qualify for another filing status. To determine your marital status on the last day of the year, see Marital Status, earlier.

Your filing status may be single if you were widowed before January 1, 2005, and did not remarry in 2005. However, you might be able to use another filing status that will give you a lower tax. See Head of Household and Qualifying Widow(er) With Dependent Child, later, to see if you qualify.

How to file. Form 1040: Use of Form 1040A: Use of Form 1040EZ: Use of Single taxpayers: How to file and forms

You can file Form 1040EZ (if you have no dependents, are under 65 and not blind, and meet other requirements), Form 1040A, or Form 1040. If you file Form 1040A or Form 1040, show your filing status as single by checking the box on line 1. Use the Single column of the Tax Table, or Section A of the Tax Computation Worksheet, to figure your tax.

Married Filing Jointly Joint returns: Filing status Married filing jointly Joint returns Married taxpayers: Joint returns Tax returns Joint returns Joint returns

You can choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. On a joint return, you report your combined income and deduct your combined allowable expenses. You can file a joint return even if one of you had no income or deductions.

Standard deduction: Married filing jointlyIf you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses.

If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). You can choose the method that gives the two of you the lower combined tax.

How to file. Form 1040: Use of Form 1040A: Use of Form 1040EZ: Use of Joint returns: How to file and forms

If you file as married filing jointly, you can use Form 1040 or Form 1040A. If you have no dependents, are under 65 and not blind, and meet other requirements, you can file Form 1040EZ. If you file Form 1040 or Form 1040A, show this filing status by checking the box on line 2. Use the Married filing jointly column of the Tax Table, or Section B of the Tax Computation Worksheet, to figure your tax.

Spouse died during the year. Death: Of spouse Joint returns: Death of spouse during year Spouse: Joint returns

If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status. See Spouse died during the year, under Married persons, earlier.

Divorced persons. Divorced taxpayers: Filing status Joint returns: Divorced taxpayers

If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married filing jointly as your filing status.

Filing a Joint Return

Both you and your spouse must include all of your income, exemptions, and deductions on your joint return.

Accounting period. Accounting periods: Joint returns Filing status Married filing jointly Joint returns Joint returns: Accounting period

Both of you must use the same accounting period, but you can use different accounting methods.

Joint responsibility. Joint returns: Responsibility for

Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse.

Divorced taxpayer. Divorced taxpayers: Joint returns, responsibility for

You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. This responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns.

Relief from joint responsibility. Divorced taxpayers: Joint returns, responsibility for: Relief from

In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse which were incorrectly reported on the joint return. You can ask for relief no matter how small the liability.

There are three types of relief available.

Innocent spouse relief, which applies to all joint filers.

Equitable relief: Innocent spouse relief Innocent spouse relief: Joint returns Joint returns: Innocent spouse Spouse: Innocent spouse relief

Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed.

Equitable relief, which applies to all joint filers who do not qualify for innocent spouse relief or separation of liability and to married couples filing separate returns in community property states.

Form 8857: Innocent spouse relief Innocent spouse relief: Form 8857You must file Form 8857, Request for Innocent Spouse Relief, to request any of these kinds of relief. Publication 971, Innocent Spouse Relief, explains these kinds of relief and who may qualify for them.

Signing a joint return. Joint returns: Signing Signatures: Joint returns Spouse: Signing joint returns

For a return to be considered a joint return, both husband and wife generally must sign the return.

Spouse died before signing. Death: Of spouse Spouse: Deceased

If your spouse died before signing the return, the executor or administrator must sign the return for your spouse. If neither you nor anyone else has yet been appointed as executor or administrator, you can sign the return for your spouse and enter Filing as surviving spouse in the area where you sign the return.

Spouse away from home.

If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so that it can be filed on time.

Injury or disease prevents signing.

If your spouse cannot sign because of injury or disease and tells you to sign, you can sign your spouse's name in the proper space on the return followed by the words By (your name), Husband (or Wife). Be sure to also sign in the space provided for your signature. Attach a dated statement, signed by you, to the return. The statement should include the form number of the return you are filing, the tax year, the reason your spouse cannot sign, and that your spouse has agreed to your signing for him or her.

Signing as guardian of spouse. Joint returns: Guardian of spouse, signing as

If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian.

Spouse in combat zone. Armed forces: Combat zone, signing return for spouse

If your spouse is unable to sign the return because he or she is serving in a combat zone (such as the Persian Gulf area, Yugoslavia, or Afghanistan), or a qualified hazardous duty area (Bosnia and Herzegovina, Croatia, or Macedonia), and you do not have a power of attorney or other statement, you can sign for your spouse. Attach a signed statement to your return that explains that your spouse is serving in a combat zone. For more information on special tax rules for persons who are serving in a combat zone, or who are in missing status as a result of serving in a combat zone, get Publication 3, Armed Forces' Tax Guide.

Other reasons spouse cannot sign.

If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a valid power of attorney (a legal document giving you permission to act for your spouse). Attach the power of attorney (or a copy of it) to your tax return. You can use Form 2848.

Nonresident alien or dual-status alien. Aliens Dual-status Dual-status taxpayers Dual-status taxpayers: Joint returns not available Joint returns: Nonresident or dual-status alien spouse Married taxpayers: Dual-status alien spouse Spouse: Dual-status alien spouse

A joint return generally cannot be filed if either spouse is a nonresident alien at any time during the tax year. However, if one spouse was a nonresident alien or dual-status alien who was married to a U.S. citizen or resident at the end of the year, the spouses can choose to file a joint return. If you do file a joint return, you and your spouse are both treated as U.S. residents for the entire tax year. See chapter 1 of Publication 519.

Married Filing Separately Married filing separately: Filing status Separate returns Married filing separately

You can choose married filing separately as your filing status if you are married. This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return.

If you and your spouse do not agree to file a joint return, you have to use this filing status unless you qualify for head of household status, discussed next.

You may be able to choose head of household filing status if you live apart from your spouse, meet certain tests, and are considered unmarried (explained later, under Head of Household). This can apply to you even if you are not divorced or legally separated. If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions. See Head of Household, later, for more information.

Unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns). This way you can make sure you are using the filing status that results in the lowest combined tax. However, you will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules, later.

How to file. Form 1040: Use of Form 1040A: Use of Married filing separately: How to file

If you file a separate return, you generally report only your own income, exemptions, credits, and deductions on your individual return. You can claim an exemption for your spouse if your spouse had no gross income and was not the dependent of another person. However, if your spouse had any gross income or was the dependent of someone else, you cannot claim an exemption for him or her on your separate return.

If you file as married filing separately, you can use Form 1040A or Form 1040. Select this filing status by checking the box on line 3 of either form. You also must enter your spouse's social security number and full name in the spaces provided. Use the Married filing separately column of the Tax Table or Section C of the Tax Computation Worksheet to figure your tax.

Special Rules Married filing separately: Special rules

If you choose married filing separately as your filing status, the following special rules apply. Because of these special rules, you will usually pay more tax on a separate return than if you used another filing status that you qualify for.

Your tax rate generally will be higher than it would be on a joint return.

Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.

You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return).

You cannot take the earned income credit.

You cannot take the exclusion or credit for adoption expenses in most cases.

You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.

You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.

If you lived with your spouse at any time during the tax year:

You cannot claim the credit for the elderly or the disabled.

You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and

You cannot roll over amounts from a traditional IRA into a Roth IRA.

The following credits and deductions are reduced at income levels that are half of those for a joint return:

The child tax credit,

The retirement savings contributions credit,

Itemized deductions, and

The deduction for personal exemptions.

Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).

If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

Individual retirement arrangements (IRAs). Individual retirement arrangements (IRAs): Married filing separately IRAs Individual retirement arrangements (IRAs) Married filing separately: Individual retirement arrangements (IRAs)

You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse was covered by an employee retirement plan at work during the year. Your deduction is reduced or eliminated if your income is more than a certain amount. This amount is much lower for married individuals who file separately and lived together at any time during the year. For more information, see How Much Can You Deduct? in chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs).

Rental activity losses. Losses: Rental real estate activities Married filing separately: Rental activity losses Rental income and expenses: Losses from rental real estate activities

If you actively participated in a passive rental real estate activity that produced a loss, you generally can deduct the loss from your nonpassive income up to $25,000. This is called a special allowance. However, married persons filing separate returns who lived together at any time during the year cannot claim this special allowance. Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum special allowance for losses from passive real estate activities. See Rental Activities in Publication 925, Passive Activity and At-Risk Rules.

Community property states. Community property states: Married filing separately, treatment of income Filing status Married filing separately Married filing separately Married filing separately: Community property states

If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. See Publication 555, Community Property.

Joint Return After Separate Returns Amended returns: Form 1040X Filing status: Change to: Joint return after separate returns Form 1040X: Change of filing status Married filing separately: Filing status: Change to Tax returns Amended Form 1040X

You can change your filing status by filing an amended return using Form 1040X.

If you or your spouse (or both of you) file a separate return, you generally can change to a joint return any time within 3 years from the due date of the separate return or returns. This does not include any extensions. A separate return includes a return filed by you or your spouse claiming married filing separately, single, or head of household filing status.

Separate Returns After Joint Return Filing status: Change to: Separate returns after joint return

Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return.

Exception.

A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. The personal representative has 1 year from the due date of the return to make the change. See Publication 559 for more information on filing income tax returns for a decedent.

Head of Household Filing status: Head of household

You may be able to file as head of household if you meet all the following requirements.

You are unmarried or considered unmarried on the last day of the year.

You paid more than half the cost of keeping up a home for the year.

A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the qualifying person is your dependent parent, he or she does not have to live with you. See Special rule for parent, later, under Qualifying Person.

Head of household: Qualifying person

If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. You will also receive a higher standard deduction than if you file as single or married filing separately.

How to file. Head of household: How to file

If you file as head of household, you can use either Form 1040A or Form 1040. Indicate your choice of this filing status by checking the box on line 4 of either form. Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax.

Considered Unmarried Head of household: Considered unmarried

To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. You are considered unmarried on the last day of the tax year if you meet all the following tests.

You file a separate return (defined, earlier, under Joint Return After Separate Returns).

You paid more than half the cost of keeping up your home for the tax year.

Your spouse did not live in your home during the last 6 months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. See Temporary absences, later.

Your home was the main home of your child, stepchild, or eligible foster child for more than half the year. (See Home of qualifying person, later, for rules applying to a child's birth, death, or temporary absence during the year.)

You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described later in Children of divorced or separated parents under Qualifying Child or in Support Test for Children of Divorced or Separated Parents under Qualifying Relative. The general rules for claiming an exemption for a dependent are explained later under Exemptions for Dependents.

If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. See Publication 555 for more information.

Nonresident alien spouse. Aliens Nonresident Nonresident aliens Head of household: Nonresident alien spouse Nonresident aliens: Spouse Spouse: Nonresident alien

You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household.

Earned income credit. Nonresident aliens: Spouse: Earned income credit

Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you are still considered married for purposes of the earned income credit (unless you meet the five tests listed earlier under Considered Unmarried). You are not entitled to the credit unless you file a joint return with your spouse and meet other qualifications.

See Publication 596 for more information.

Choice to treat spouse as resident.

You are considered married if you choose to treat your spouse as a resident alien. See chapter 1 of Publication 519.

Keeping Up a Home Head of household: Cost of keeping up home Home: Cost of keeping up

To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. You can determine whether you paid more than half of the cost of keeping up a home by using the following worksheet.

Cost of Keeping Up a Home Amount You Paid Total Cost Property taxes $ $ Mortgage interest expense Rent Utility charges Upkeep and repairs Property insurance Food consumed on the premises Other household expenses Totals $ $ Minus total amount you paid ( ) Amount others paid $ If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home.

Worksheets: Head of household status and cost of keeping up home Costs you include.

Include in the cost of upkeep expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home.

Costs you do not include.

Do not include in the cost of upkeep expenses such as clothing, education, medical treatment, vacations, life insurance, or transportation. Also, do not include the rental value of a home you own or the value of your services or those of a member of your household.

Hurricane Katrina

Also do not include any government or charitable assistance you received because of your temporary relocation due to Hurricane Katrina.

Qualifying Person Head of household: Qualifying person to file as Qualifying: Person

See Table 4 to see who is a qualifying person.

Any person not described in Table 4 is not a qualifying person.

Home of qualifying person.

Generally, the qualifying person must live with you for more than half of the year.

Special rule for parent. Children: Claiming parent, when child is head of household Parent: Head of household, claim for

If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. However, you must be able to claim an exemption for your father or mother. Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly.

Death or birth. Birth: Of child Of dependent Children: Birth of child: Head of household, qualifying person to file as Children: Death of child: Head of household, qualifying person to file as Death: Of dependent

You may be eligible to file as head of household if the individual who qualifies you for this filing status is born or dies during the year. You must have provided more than half of the cost of keeping up a home that was the individual's main home for more than half of the year, or, if less, the period during which the individual lived.

Example.

You are unmarried. Your mother, for whom you can claim an exemption, lived in an apartment by herself. She died on September 2. The cost of the upkeep of her apartment for the year until her death was $6,000. You paid $4,000 and your brother paid $2,000. Your brother made no other payments towards your mother's support. Your mother had no income. Because you paid more than half of the cost of keeping up your mother's apartment from January 1 until her death, and you can claim an exemption for her, you can file as a head of household.

Temporary absences. Absence, temporary

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, or military service. It must be reasonable to assume that the absent person will return to the home after the temporary absence. You must continue to keep up the home during the absence.

Kidnapped child. Kidnapped children: Head of household status and

You may be eligible to file as head of household, even if the child who is your qualifying person has been kidnapped. You can claim head of household filing status if all the following statements are true.

The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.

In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.

You would have qualified for head of household filing status if the child had not been kidnapped.

This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of:

The year there is a determination that the child is dead, or

The year the child would have reached age 18.

Filing status: Change to: Separate returns after joint return

Married child.

Your child who is married at the end of the year generally cannot be your qualifying person unless you can claim the child as a dependent. However, the child is a qualifying person if all three of the following requirements are met.

The child is your qualifying child (as defined under Exemptions for Dependents), later.

The child does not file a joint return, unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.

The child is a U.S. citizen or resident, or a resident of Canada or Mexico. (This requirement is met if you are a U.S. citizen and the child is an adopted child who lived with you all year as a member of your household.)

Qualifying Widow(er) With Dependent Child Head of household: Qualifying surviving spouse with dependent child Qualifying: Surviving spouse Widow/widower Spouse Surviving Surviving spouse Surviving spouse: Widow(er) with dependent child Widow/widower Surviving spouse

If your spouse died in 2005, you can use married filing jointly as your filing status for 2005 if you otherwise qualify to use that status. The year of death is the last year for which you can file jointly with your deceased spouse. See Married Filing Jointly, earlier.

You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year your spouse died. For example, if your spouse died in 2004 and you have not remarried, you may be able to use this filing status for 2005 and 2006. The rules for using this filing status are explained in detail here.

This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). This status does not entitle you to file a joint return.

How to file. Surviving spouse: Widow(er) with dependent child: How to file

If you file as a qualifying widow(er) with dependent child, you can use either Form 1040A or Form 1040. Indicate your filing status by checking the box on line 5 of either form. Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax.

<ROM>Table 4.</ROM> <IMARK> Who Is a Qualifying Person for Filing as Head of Household? <SUP>1</SUP>Caution: See the text of this publication for the other requirements you must meet to claim head of household filing status. IF the person is your . . . AND . . . THEN that person is . . . qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests) ² he or she is single a qualifying person, whether or not you can claim an exemption for the person. he or she is married and you can claim an exemption for him or her a qualifying person. he or she is married and you cannot claim an exemption for him or her not a qualifying person. ³ qualifying relative ⁴ who is your father or mother you can claim an exemption for him or her a qualifying person. ⁵ you cannot claim an exemption for him or her not a qualifying person. qualifying relative ⁴ other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) ⁶ he or she lived with you more than half the year, and you can claim an exemption for him or her ⁷ a qualifying person. he or she did not live with you more than half the year not a qualifying person. you cannot claim an exemption for him or her not a qualifying person. ¹A person cannot qualify more than one taxpayer to use the head of household filing status for the year. ²The term qualifying child is defined under Exemptions for Dependents, later. Note: If you are a noncustodial parent, the term qualifying child for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of divorced or separated parents under Qualifying Child, later. If you are the custodial parent and those rules apply, the child generally is your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. ³ This person is a qualifying person if the requirements described under Married child are met. ⁴The term qualifying relative is defined under Exemptions for Dependents, later. ⁵See Special rule for parent for an additional requirement. ⁶A person who is your qualifying relative only because he or she lived with you all year as a member of your household is not a qualifying person. ⁷If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. See Multiple Support Agreement.

Eligibility rules. Surviving spouse: Widow(er) with dependent child: Eligibility rules

You are eligible to file your 2005 return as a qualifying widow(er) with dependent child if you meet all the following tests.

You were entitled to file a joint return with your spouse for the year your spouse died. It does not matter whether you actually filed a joint return.

Your spouse died in 2003 or 2004 and you did not remarry before the end of 2005.

You have a child or stepchild for whom you can claim an exemption. This does not include a foster child.

You paid more than half of the cost of keeping up a home that was the main home for you and that child for the entire year, except for temporary absences. See Temporary absences and Keeping Up a Home, discussed earlier under Head of Household.

Example.

John Reed's wife died in 2003. John has not remarried. He has continued during 2004 and 2005 to keep up a home for himself and his child for whom he can claim an exemption. For 2003 he was entitled to file a joint return for himself and his deceased wife. For 2004 and 2005, he can file as a qualifying widower with a dependent child. After 2005, he can file as head of household if he qualifies.

Death or birth. Children: Birth of child: Widow(er) with dependent child, qualifying person to file as Children: Death of child: Widow(er) with dependent child, qualifying person to file as Kidnapped children: Widow(er) with dependent child Surviving spouse: Widow(er) with dependent child: Death or birth of child

You may be eligible to file as a qualifying widow(er) with dependent child if the child who qualifies you for this filing status is born or dies during the year. You must have provided more than half of the cost of keeping up a home that was the child's main home during the entire part of the year he or she was alive.

Kidnapped child. Surviving spouse: Widow(er) with dependent child: Kidnapped child

You may be eligible to file as a qualifying widow(er) with dependent child, even if the child who qualifies you for this filing status has been kidnapped. You can claim qualifying widow(er) with dependent child filing status if all the following statements are true.

The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.

In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping.

You would have qualified for qualifying widow(er) with dependent child filing status if the child had not been kidnapped.

Filing statusAs mentioned earlier, this filing status is available for only 2 years following the year your spouse died.

Exemptions Exemptions

Exemptions reduce your taxable income. Generally, you can deduct $3,200 for each exemption you claim in 2005. If you are entitled to two exemptions for 2005, you would deduct $6,400 ($3,200 × 2). But you may lose the benefit of part or all of your exemptions if your adjusted gross income is above a certain amount. See Phaseout of Exemptions, later.

You usually can claim exemptions for yourself, your spouse, and each person you can claim as a dependent.

Types of exemptions. Exemptions: Types of

There are two types of exemptions: personal exemptions and exemptions for dependents. While each is worth the same amount ($3,200 for 2005), different rules, discussed later, apply to each type.

Who cannot claim a personal exemption. Personal exemption: Who cannot claim

If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim a personal exemption on his or her own tax return.

Exemption for individual displaced by Hurricane Katrina. Hurricane Katrina

You may be able to claim a $500 exemption if you provided housing to a person displaced by Hurricane Katrina. For details, see Exemption for Individual Displaced by Hurricane Katrina, later.

How to claim exemptions. Exemptions: How to claim Personal exemption: How to claim

How you claim an exemption on your tax return depends on which form you file.

Form 1040EZ filers. Form 1040EZ: Personal exemption

If you file Form 1040EZ, the exemption amount is combined with the standard deduction and entered on line 5.

Form 1040A filers. Form 1040A: Personal exemption

If you file Form 1040A, complete lines 6a through 6d. The total number of exemptions you can claim is the total in the box on line 6d. Also complete line 26 by multiplying the number in the box on line 6d by $3,200. If your adjusted gross income is more than $109,475, see Phaseout of Exemptions, later.

Form 1040 filers. Form 1040: Personal exemption

If you file Form 1040, complete lines 6a through 6d. On line 42, multiply the total exemptions shown in the box on line 6d by $3,200 and enter the result. If your adjusted gross income is more than $109,475, see Phaseout of Exemptions, later.

U.S. citizen or resident. Exemptions: U.S. citizen or resident

Canada, resident of Mexico, resident ofIf you are a U.S. citizen, U.S. resident, U.S. national (defined later) or a resident of Canada or Mexico, you may qualify for any of the exemptions discussed here.

Nonresident aliens.

Aliens Nonresident Nonresident aliens Exemptions: Nonresident aliens Nonresident aliens: ExemptionsGenerally, if you are a nonresident alien (other than a resident of Canada or Mexico, or certain residents of India, Japan, or Korea), you can qualify for only one personal exemption for yourself. You cannot claim exemptions for a spouse or dependents.

These restrictions do not apply if you are a nonresident alien married to a citizen or resident of the United States and have chosen to be treated as a resident of the United States.

Residents of Japan. Japan, residents of

Beginning in 2005, nonresident aliens who are residents of Japan generally cannot claim an exemption for a spouse or dependent. However, if you choose to have the old U.S.-Japan treaty apply in its entirety for 2005, you may be able to claim these exemptions for 2005.

More information.

For more information on exemptions if you are a nonresident alien, see chapter 5 in Publication 519.

Dual-status taxpayers. Aliens Dual-status Dual-status taxpayers Dual-status taxpayers: Exemptions Exemptions: Dual-status taxpayers

If you have been both a nonresident alien and a resident alien in the same tax year, you should get Publication 519 for information on determining your exemptions.

Personal Exemptions Deductions Personal exemption Exemptions Personal Personal exemption Personal exemption

You are generally allowed one exemption for yourself and, if you are married, one exemption for your spouse. These are called personal exemptions.

Your Own Exemption Single taxpayers: Personal exemption

You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent.

Your Spouse's Exemption Personal exemption: Spouse's exemption Spouse: Exemption for

Your spouse is never considered your dependent.

Joint return. Joint returns: Personal exemption Personal exemption: Joint return

On a joint return, you can claim one exemption for yourself and one for your spouse.

Separate return. Married filing separately: Personal exemption Personal exemption: Separate return

If you file a separate return, you can claim the exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. This is true even if the other taxpayer does not actually claim your spouse as a dependent. This is also true if your spouse is a nonresident alien.

Head of household. Head of household: Personal exemption Personal exemption: Head of household

If you qualify for head of household filing status because you are considered unmarried, you can claim an exemption for your spouse if the conditions described in the preceding paragraph are satisfied.

To claim the exemption for your spouse, check the box on line 6b of Form 1040 or Form 1040A and enter the name of your spouse in the space to the right of the box. Enter the SSN or ITIN of your spouse in the space provided at the top of Form 1040 or Form 1040A.

Death of spouse. Personal exemption: Deceased spouse Spouse: Deceased

If your spouse died during the year, you generally can claim your spouse's exemption under the rules just explained in Joint return and Separate return.

If you remarried during the year, you cannot take an exemption for your deceased spouse.

If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed as an exemption on both the final separate return of your deceased spouse and the separate return of your new spouse for that year. If you file a joint return with your new spouse, you can be claimed as an exemption only on that return.

Divorced or separated spouse. Divorced taxpayers: Personal exemption Personal exemption: Divorced or separated spouse Separated taxpayers: Personal exemption

If you obtained a final decree of divorce or separate maintenance by the end of the year, you cannot take your former spouse's exemption. This rule applies even if you provided all of your former spouse's support.

Exemption for Individual Displaced by Hurricane Katrina Hurricane Katrina

You may be able to take an exemption amount of $500 for providing housing to a person displaced by Hurricane Katrina. You cannot claim this amount for housing your spouse or any of your dependents.

You can claim this exemption for up to four individuals. You may be able to take this exemption if all of the following are true.

You provided housing in your main home free of charge for at least 60 consecutive days in 2005 to a person displaced by Hurricane Katrina.

The person lived in the Hurricane Katrina disaster area on August 28, 2005.

You did not receive rent or any other amount for providing the housing.

To claim this amount, file Form 8914. For more information, see Publication 4492.

Exemptions for Dependents Exemptions: Dependents Dependents: Exemption for

You are allowed one exemption for each person you can claim as a dependent. You can claim an exemption for a dependent even if your dependent files a return.

Beginning in 2005, the term dependent means:

A qualifying child, or

A qualifying relative.

The terms qualifying child and qualifying relative are defined later.

You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met.

Dependent taxpayer test.

Joint return test.

Citizen or resident test.

These three tests are explained in detail later.

All the requirements for claiming an exemption for a dependent are summarized in Table 5.

<ROM>Table 5.</ROM> <IMARK> Overview of the Rules for Claiming an Exemption for a DependentCaution: This table is only an overview of the rules. For details, see the rest of this publication.

You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.

You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns.

You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident, U.S. national, or a resident of Canada or Mexico, for some part of the year. ¹

You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative.

Tests To Be a Qualifying Child Tests To Be a Qualifying Relative

The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.

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 if permanently and totally disabled.

The child must have lived with you for more than half of the year. ²

The child must not have provided more than half of his or her own support for the year.

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.

The person cannot be your qualifying child or the qualifying child of anyone else.

The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you, or (b) must live with you all year as a member of your household. ²

The person's gross income for the year must be less than $3,200. ³

You must provide more than half of the person's total support for the year. ⁴

¹There is an exception for certain adopted children. ²There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents, and kidnapped children. ³There is an exception if the person is disabled and has income from a sheltered workshop. ⁴There is an exception for multiple support agreements.

Dependent not allowed a personal exemption. If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. This is true even if you do not claim the dependent's exemption on your return or if the exemption will be reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later.

Housekeepers, maids, or servants. Domestic help, no exemption for Household workers, no exemption for

If these people work for you, you cannot claim exemptions for them.

Child tax credit. Child tax credit

You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year. For more information, see the instructions in your tax forms package.

Dependent Taxpayer Test Dependent taxpayer test Dependents: Not allowed to claim dependents

If you could be claimed as a dependent by another person, you cannot claim anyone else as a dependent. Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent.

If you are filing a joint return and your spouse could be claimed as a dependent by someone else, you and your spouse cannot claim any dependents on your joint return.

Joint Return Test Joint return test Married dependents, filing joint return Dependents: Married, filing joint return

You generally cannot claim a married person as a dependent if he or she files a joint return.

Example.

You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. The couple files a joint return. Even though your daughter is your qualifying child, you cannot take an exemption for her.

Exception.

The joint return test does not apply if a joint return is filed by the dependent and his or her spouse merely as a claim for refund and no tax liability would exist for either spouse on separate returns.

Example.

Your son and his wife each had less than $3,000 of wages and no unearned income. Neither is required to file a tax return. Taxes were taken out of their pay, so they filed a joint return to get a refund. You are not disqualified from claiming their exemptions just because they filed a joint return.

Citizen or Resident Test Citizen or resident test U.S. citizen or resident Canada, resident of Mexico, resident of

You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident, U.S. national, or a resident of Canada or Mexico, for some part of the year. However, there is an exception for certain adopted children, as explained next.

Adopted child. Adopted child Children Adoption Adopted child

If you are a U.S. citizen who has legally adopted a child who is not a U.S. citizen, U.S. resident, or U.S. national, this test is met if the child lived with you as a member of your household all year. This also applies if the child was lawfully placed with you for legal adoption.

Child's place of residence.

Children usually are citizens or residents of the country of their parents.

If you were a U.S. citizen when your child was born, the child may be a U.S. citizen even if the other parent was a nonresident alien and the child was born in a foreign country. If so, this test is met.

Foreign students' place of residence. Foreign students Students: Foreign

Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U.S. residents and do not meet this test. You cannot claim an exemption for them. However, if you provided a home for a foreign student, you may be able to take a charitable contribution deduction. See Expenses Paid for Student Living With You in Publication 526, Charitable Contributions.

U.S. national.

U.S. national National of the United States

A U.S. national is an individual who, although not a U.S. citizen, owes his or her allegiance to the United States. U.S. nationals include American Samoans and Northern Mariana Islanders who chose to become U.S. nationals instead of U.S. citizens.

Qualifying Child Qualifying: Child Child, qualifying Dependents: Qualifying child

There are five tests that must be met for a child to be your qualifying child. The five tests are:

Relationship,

Age,

Residency,

Support, and

Special test for qualifying child of more than one person.

These tests are explained next.

Relationship Test Relationship test

To meet this test, a child must be:

Your son, daughter, stepchild, eligible foster child, or a descendant (for example, your grandchild) of any of them, or

Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them.

Adopted child. Adopted child

An adopted child is always treated as your own child. The term adopted child includes a child who was lawfully placed with you for legal adoption.

Eligible foster child. Eligible foster child Foster child

An eligible foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Age Test Age: Test

To meet this test, a child must be:

Under age 19 at the end of the year,

A full-time student under age 24 at the end of the year, or

Permanently and totally disabled at any time during the year, regardless of age.

Example.

Your son turned 19 on December 10. Unless he was disabled or a full-time student, he does not meet the age test because, at the end of the year, he was not under age 19.

Full-time student.

A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance.

Student defined. Students: Defined

To qualify as a student, your child must be, during some part of each of any 5 calendar months of the year:

A full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school, or

A student taking a full-time, on-farm training course given by a school described in (1), or by a state, county, or local government agency.

The 5 calendar months do not have to be consecutive.

Hurricane Katrina. Hurricane Katrina

If your child enrolled in school before August 25, 2005, the child is treated as a student for any month of the enrollment period he or she was unable to attend classes because of Hurricane Katrina.

School defined.

A school can be an elementary school, junior and senior high school, college, university, or technical, trade, or mechanical school. However, an on-the-job training course, correspondence school, or Internet school does not count as a school.

Vocational high school students.

Students who work on co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students.

Permanently and totally disabled.

Your child is permanently and totally disabled if both of the following apply.

He or she cannot engage in any substantial gainful activity because of a physical or mental condition.

A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death.

Residency Test Residency test

To meet this test, your child must have lived with you for more than half of the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents.

Temporary absences. Temporary absences Absence, temporary

Your child is considered to have lived with you during periods of time when one of you, or both, are temporarily absent due to special circumstances such as:

Illness,

Education,

Business,

Vacation, or

Military service.

Death or birth of child. Death: Of child Birth: Of child

A child who was born or died during the year is treated as having lived with you all year if your home was the child's home the entire time he or she was alive during the year. The same is true if the child lived with you all year except for any required hospital stay following birth.

Child born alive. Child born alive

You may be able to claim an exemption for a child who was born alive during the year, even if the child lived only for a moment. State or local law must treat the child as having been born alive. There must be proof of a live birth shown by an official document, such as a birth certificate. The child must be your qualifying child or qualifying relative, and all the other tests to claim an exemption for a dependent must be met.

Stillborn child. Stillborn child Children: Stillborn

You cannot claim an exemption for a stillborn child.

Kidnapped child. Kidnapped children: Qualifying child Children: Kidnapped

You can treat your child as meeting the residency test even if the child has been kidnapped, but both of the following statements must be true.

The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.

In the year the kidnapping occurred, the child lived with you for more than half of the part of the year before the date of the kidnapping.

This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of:

The year there is a determination that the child is dead, or

The year the child would have reached age 18.

Children of divorced or separated parents. Parents, divorced or separated Divorced parents Separated parents

A child will be treated as the qualifying child of his or her noncustodial parent if all of the following apply.

The parents:

Are divorced or legally separated under a decree of divorce or separate maintenance,

Are separated under a written separation agreement, or

Lived apart at all times during the last 6 months of the year.

The child received over half of his or her support for the year from the parents.

The child is in the custody of one or both parents for more than half of the year.

A decree of divorce or separate maintenance or written separation agreement that applies to 2005 provides that the noncustodial parent can claim the child as a dependent (and, in the case of a pre-1985 agreement, the noncustodial parent provides at least $600 for the support of the child during the year) or the custodial parent signs a written declaration that he or she will not claim the child as a dependent for the year.

Written declaration. Form 8332: Release of exemption to noncustodial parent

The custodial parent may use either Form 8332 or a similar statement (containing the information required by the form) to make the written declaration to release the exemption to the noncustodial parent.

The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration.

Custodial parent and noncustodial parent. Child custody Children: Custody of Custody of child Divorced taxpayers: Child custody

The custodial parent is the parent with whom the child lived for the greater part of the year. The other parent is the noncustodial parent.

If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater part of the rest of the year.

Example.

Your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are considered the custodial parent.

Parents who never married.

This special rule for divorced or separated parents also applies to parents who never married.

Support Test (To Be a Qualifying Child) Support test: Qualifying child

To meet this test, the child cannot have provided more than half of his or her own support for the year.

This test is different from the support test to be a qualifying relative, which is described later. However, to see what is or is not support, see Support Test (To Be a Qualifying Relative), later. If you are not sure whether a child provided more than half of his or her own support, you may find Worksheet 1 helpful.

Scholarships. Scholarships

A scholarship received by a child who is a full-time student is not taken into account in determining whether the child provided more than half of his or her own support.

Special Test for Qualifying Child of More Than One Person

If your qualifying child is not a qualifying child for anyone else, this test does not apply to you and you do not need to read about it. This is also true if your qualifying child is not a qualifying child for anyone else except your spouse with whom you file a joint return.

If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents described earlier, see Applying this special test to divorced or separated parents, later.

Sometimes, a child meets the relationship, age, residency, and support tests to be a qualifying child of more than one person. Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. To meet this special test, you must be the person who can treat the child as a qualifying child.

If you and another person have the same qualifying child, you and the other person(s) can decide which of you will treat the child as a qualifying child. That person can take all of the following tax benefits (provided the person is eligible for each benefit) based on the qualifying child.

The exemption for the child.

The child tax credit.

Head of household filing status.

The credit for child and dependent care expenses.

The earned income credit.

The other person cannot take any of these benefits based on this qualifying child. In other words, you and the other person cannot agree to divide these tax benefits between you.

If you and the other person(s) cannot agree on who will claim the child and more than one person files a return claiming the same child, the IRS will disallow all but one of the claims using the tie-breaker rule in Table 6.

<ROM>Table 6. </ROM> <IMARK>When More Than One Person Files a Return Claiming the Same Qualifying Child (Tie-Breaker Rule)Caution. If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents, see Applying this special test to divorced or separated parents. IF more than one person files a return claiming the same qualifying child and . . . THEN the child will be treated as the qualifying child of the. . . only one of the persons is the child's parent, parent. two of the persons are parents of the child and they do not file a joint return together, parent with whom the child lived for the longer period of time during the year. two of the persons are parents of the child, they do not file a joint return together, and the child lived with each parent the same amount of time during the year, parent with the highest adjusted gross income (AGI). none of the persons are the child's parent, person with the highest AGI.

Example 1—child lived with parent and grandparent.

You and your 3-year-old daughter Jade lived with your mother all year. You are 25 years old and earned $9,000 for the year. Jade is a qualifying child of both you and your mother because she meets the relationship, age, residency, and support tests for both you and your mother. However, only one of you can claim her. You agree to let your mother claim Jade. This means she can claim Jade as a dependent and can claim her as a qualifying child for the child tax credit, head of household filing status, credit for child and dependent care expenses, and the earned income credit, if she qualifies for each of those tax benefits.

Example 2—two persons unable to agree.

The facts are the same as in Example 1 except that you and your mother are unable to agree and both of you claim Jade as a dependent and claim her as a qualifying child for the child tax credit and earned income credit. You as the child's parent will be the only one allowed to claim Jade as a dependent and claim her as a qualifying child for the child tax credit and earned income credit. The IRS will disallow your mother's claim to these tax benefits unless she has another qualifying child.

Example 3—qualifying children split between two persons.

The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. Only one of you can claim each child as a dependent. However, you and your mother can split the three qualifying children between you. For example, you can claim one child as a dependent and your mother can claim the other two.

Example 4—taxpayer who is a qualifying child.

The facts are the same as in Example 1 except that you are only 18 years old and did not provide more than half of your own support for the year. This means you are your mother's qualifying child and she could claim you as a dependent. Because of the Dependent Taxpayer Test explained earlier, you cannot treat your daughter as a qualifying child and cannot claim her as a dependent. Only your mother can treat your daughter as a qualifying child.

Example 5—separated parents.

You, your husband, and your 10-year-old son lived together until August 1, 2005, when your husband moved out of the household. In August and September, your son lived with you. For the rest of the year, your son lived with your husband. Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, and support tests for both of you. You and your husband are not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents does not apply.

You and your husband will file separate returns. Your husband agrees to let you treat your son as a qualifying child. This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit. However, you cannot claim head of household filing status because you and your husband did not live apart the last six months of the year. As a result, your filing status is married filing separately, so you cannot claim the earned income credit or the credit for child and dependent care expenses.

Example 6—separated parents.

The facts are the same as in Example 5 except that you and your husband are unable to agree and both of you claim your son as a qualifying child. Only your husband will be allowed to treat your son as a qualifying child. This is because, during 2005, the boy lived with him longer than with you. If you claimed an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits. In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. As a result, his filing status is married filing separately, so he cannot claim the earned income credit or the credit for child and dependent care expenses.

Example 7—unmarried parents.

You, your 5-year-old son, and your son's father lived together all year. You and your son's father are not married. Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and support tests for both you and his father. Your adjusted gross income (AGI) is $8,000 and your son's father's AGI is $18,000. Your son's father agrees to let you treat the child as a qualifying child. This means you can claim him as a dependent and treat him as a qualifying child for the child tax credit, head of household filing status, credit for child and dependent care expenses, and the earned income credit, if you qualify for each of those tax benefits.

Example 8—unmarried parents.

The facts are the same as in Example 7 except that you and your son's father are unable to agree and both of you claim your son as a qualifying child. Only your son's father will be allowed to treat your son as a qualifying child. This is because his AGI, $18,000, is more than your AGI, $8,000. If you claimed an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, or the earned income credit for your son, the IRS will disallow your claim to all these tax benefits.

Example 9—child did not live with a parent.

You and your 7-year-old niece, your sister's child, lived with your mother all year. You are 25 years old, and your AGI is $9,300. Your mother's AGI is $15,000. Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and support tests for both you and your mother. However, only one of you can treat her as a qualifying child. Your mother agrees to let you treat the child as a qualifying child.

Example 10—child did not live with a parent.

The facts are the same as in Example 9 except that you and your mother are unable to agree and both of you claim your niece as a qualifying child. Only your mother will be allowed to treat your niece as a qualifying child. This is because your mother's AGI, $15,000, is more than your AGI, $9,300. If you claimed an exemption, the child tax credit, head of household filing status, credit for child and dependent care expenses, or the earned income credit for your niece, the IRS will disallow your claim to all these tax benefits.

Applying this special test to divorced or separated parents.

If a child is treated as the qualifying child of the noncustodial parent under the rules for children of divorced or separated parents described earlier, the noncustodial parent can claim an exemption and the child tax credit for the child but cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, or the earned income credit. If the child is the qualifying child of more than one other person, only one of those persons can claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, and the earned income credit. No other person can claim any of these three tax benefits unless he or she has a different qualifying child. If you and any other person file a return claiming the child as a qualifying child for any of these three tax benefits, the IRS will disallow all but one of the claims using the tie-breaker rule in Table 6.

Qualifying Relative Qualifying: Relative Relative, qualifying Dependents: Qualifying relative

There are four tests that must be met for a person to be your qualifying relative. The four tests are:

Not a qualifying child test,

Member of household or relationship test,

Gross income test, and

Support test.

Age.

Unlike a qualifying child, a qualifying relative can be any age. There is no age test for a qualifying relative.

Kidnapped child. Kidnapped children: Qualifying relative

You can treat a child as your qualifying relative even if the child has been kidnapped, but both of the following statements must be true.

The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family.

In the year the kidnapping occurred, the child met the tests to be your qualifying relative for the part of the year before the date of the kidnapping.

This treatment applies for all years until the child is returned. However, the last year this treatment can apply is the earlier of:

The year there is a determination that the child is dead, or

The year the child would have reached age 18.

Not a Qualifying Child Test

A child is not your qualifying relative if the child is your qualifying child or the qualifying child of anyone else.

Example 1.

Your 22-year-old daughter, who is a student, lives with you and meets all the tests to be your qualifying child. She is not your qualifying relative.

Example 2.

Your 2-year-old son lives with your parents and meets all the tests to be their qualifying child. He is not your qualifying relative.

Example 3.

Your son lives with you but is not your qualifying child because he is 30 years old and does not meet the age test. He may be your qualifying relative if the gross income test and the support test are met.

Example 4.

Your 13-year-old grandson lived with his mother for 3 months, with his uncle for 4 months, and with you for 5 months during the year. He is not your qualifying child because he does not meet the residency test. He may be your qualifying relative if the gross income test and the support test are met.

Member of Household or Relationship Test Member of household or relationship test Relationship test

To meet this test, a person must either:

Live with you all year as a member of your household, or

Be related to you in one of the ways listed under Relatives who do not have to live with you.

If at any time during the year the person was your spouse, that person cannot be your qualifying relative. However, see Personal Exemptions, earlier.

Relatives who do not have to live with you.

A person related to you in any of the following ways does not have to live with you all year as a member of your household to meet this test.

Your child, stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild). (A legally adopted child is considered your child.)

Your brother, sister, half brother, half sister, stepbrother, or stepsister.

Your father, mother, grandparent, or other direct ancestor, but not foster parent.

Your stepfather or stepmother.

A son or daughter of your brother or sister.

A brother or sister of your father or mother.

Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

Any of these relationships that were established by marriage are not ended by death or divorce.

Eligible foster child. Eligible foster child Foster child

An eligible foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.

Joint return. Joint returns: Dependents on

If you file a joint return, the person can be related to either you or your spouse. Also, the person does not need to be related to the spouse who provides support.

For example, your spouse's uncle who receives more than half of his support from you may be your qualifying relative, even though he does not live with you. However, if you and your spouse file separate returns, your spouse's uncle can be your qualifying relative only if he lives with you all year as a member of your household.

Temporary absences. Temporary absences Absence, temporary

A person is considered to live with you as a member of your household during periods of time when one of you, or both, are temporarily absent due to special circumstances such as:

Illness,

Education,

Business,

Vacation, or

Military service.

If the person is placed in a nursing home for an indefinite period of time to receive constant medical care, the absence may be considered temporary.

Death or birth. Death: Of dependent Birth: Of dependent Dependents: Death of Dependents: Birth of

A person who died during the year, but lived with you as a member of your household until death, will meet this test. The same is true for a child who was born during the year and lived with you as a member of your household for the rest of the year. The test is also met if a child lived with you as a member of your household except for any required hospital stay following birth.

If your dependent died during the year and you otherwise qualified to claim an exemption for the dependent, you can still claim the exemption.

Example.

Your dependent mother died on January 15. She met the tests to be your qualifying relative. The other tests to claim an exemption for a dependent were also met. You can claim an exemption for her on your return.

Local law violated. Local law violated

A person does not meet this test if at any time during the year the relationship between you and that person violates local law.

Example.

Your girlfriend lived with you as a member of your household all year. However, your relationship with her violated the laws of the state where you live, because she was married to someone else. Therefore, she does not meet this test and you cannot claim her as a dependent.

Adopted child. Adopted child

An adopted child is always treated as your own child. The term adopted child includes a child who was lawfully placed with you for legal adoption.

Cousin. Cousin

Your cousin meets this test only if he or she lives with you all year as a member of your household. A cousin is a descendant of a brother or sister of your father or mother.

Gross Income Test Gross income: Test Income: Gross

To meet this test, a person's gross income for the year must be less than $3,200.

Gross income defined.

Gross income is all income in the form of money, property, and services that is not exempt from tax.

In a manufacturing, merchandising, or mining business, gross income is the total net sales minus the cost of goods sold, plus any miscellaneous income from the business.

Gross receipts from rental property are gross income. Do not deduct taxes, repairs, etc., to determine the gross income from rental property.

Gross income includes a partner's share of the gross (not a share of the net) partnership income.

ScholarshipsGross income also includes all unemployment compensation and certain scholarship and fellowship grants. Scholarships received by degree candidates that are used for tuition, fees, supplies, books, and equipment required for particular courses may not be included in gross income. For more information about scholarships, see chapter 1 of Publication 970, Tax Benefits for Education.

Tax-exempt income, such as certain social security benefits, is not included in gross income.

Disabled dependent working at sheltered workshop.

For purposes of this test (the gross income test), the gross income of an individual who is permanently and totally disabled at any time during the year does not include income for services the individual performs at a sheltered workshop. The availability of medical care at the workshop must be the main reason for the individual's presence there. Also, the income must come solely from activities at the workshop that are incident to this medical care.

A sheltered workshop is a school that:

Provides special instruction or training designed to alleviate the disability of the individual, and

Is operated by certain tax-exempt organizations or by a state, a U.S. possession, a political subdivision of a state or possession, the United States, or the District of Columbia.

Support Test (To Be a Qualifying Relative) Support test: Qualifying relative

To meet this test, you generally must provide more than half of a person's total support during the calendar year.

However, if two or more persons provide support, but no one person provides more than half of a person's total support, see Multiple Support Agreement, later.

How to determine if support test is met.

You figure whether you have provided more than half of a person's total support by comparing the amount you contributed to that person's support with the entire amount of support that person received from all sources. This includes support the person provided from his or her own funds.

You may find Worksheet 1 helpful in figuring whether you provided more than half of a person's support.

Person's own funds not used for support.

A person's own funds are not support unless they are actually spent for support.

Example.

Your mother received $2,400 in social security benefits and $300 in interest. She paid $2,000 for lodging and $400 for recreation. She put $300 in a savings account.

Even though your mother received a total of $2,700, she spent only $2,400 for her own support. If you spent more than $2,400 for her support and no other support was received, you have provided more than half of her support.

Child's wages used for own support.

You cannot include in your contribution to your child's support any support that is paid for by the child with the child's own wages, even if you paid the wages.

Year support is provided.

The year you provide the support is the year you pay for it, even if you do so with borrowed money that you repay in a later year.

If you use a fiscal year to report your income, you must provide more than half of the dependent's support for the calendar year in which your fiscal year begins.

Armed Forces dependency allotments. Armed forces: Dependency allotments Military Armed forces

The part of the allotment contributed by the government and the part taken out of your military pay are both considered provided by you in figuring whether you provide more than half of the support. If your allotment is used to support persons other than those you name, you can take the exemptions for them if they otherwise qualify.

Example.

You are in the Armed Forces. You authorize an allotment for your widowed mother that she uses to support herself and her sister. If the allotment provides more than half of each person's support, you can take an exemption for each of them, if they otherwise qualify, even though you authorize the allotment only for your mother.

Tax-exempt military quarters allowances. Armed forces: Military quarters allotments

These allowances are treated the same way as dependency allotments in figuring support. The allotment of pay and the tax-exempt basic allowance for quarters are both considered as provided by you for support.

Tax-exempt income. Income: Tax exempt Tax-exempt income

In figuring a person's total support, include tax-exempt income, savings, and borrowed amounts used to support that person. Tax-exempt income includes certain social security benefits, welfare benefits, nontaxable life insurance proceeds, Armed Forces family allotments, nontaxable pensions, and tax-exempt interest.

Example 1.

You provide $4,000 toward your mother's support during the year. She has earned income of $600, nontaxable social security benefits of $4,800, and tax-exempt interest of $200. She uses all these for her support. You cannot claim an exemption for your mother because the $4,000 you provide is not more than half of her total support of $9,600.

Example 2.

Your brother's daughter takes out a student loan of $2,500 and uses it to pay her college tuition. She is personally responsible for the loan. You provide $2,000 toward her total support. You cannot claim an exemption for her because you provide less than half of her support.

Social security benefits. Social security benefits

If a husband and wife each receive benefits that are paid by one check made out to both of them, half of the total paid is considered to be for the support of each spouse, unless they can show otherwise.

If a child receives social security benefits and uses them toward his or her own support, the benefits are considered as provided by the child.

Support provided by the state (welfare, food stamps, housing, etc.). Food stamps Welfare benefits

Benefits provided by the state to a needy person generally are considered support provided by the state. However, payments based on the needs of the recipient will not be considered as used entirely for that person's support if it is shown that part of the payments were not used for that purpose.

Foster care payments and expenses. Foster child Foster care payments and expenses

Payments you receive for the support of a foster child from a child placement agency are considered support provided by the agency. Similarly, payments you receive for the support of a foster child from a state or county are considered support provided by the state or county.

If you are not in the trade or business of providing foster care and your unreimbursed out-of-pocket expenses in caring for a foster child were mainly to benefit an organization qualified to receive deductible charitable contributions, the expenses are deductible as charitable contributions but are not considered support you provided. For more information about the deduction for charitable contributions, see Publication 526. If your unreimbursed expenses are not deductible as charitable contributions, they are considered support you provided.

If you are in the trade or business of providing foster care, your unreimbursed expenses are not considered support provided by you.

Example.

Lauren, an eligible foster child, lived with Mr. and Mrs. Smith for the last 3 months of the year. The Smiths cared for Lauren because they wanted to adopt her (although she had not been placed with them for adoption). They did not care for her as a trade or business or to benefit the agency that placed her in their home. The Smiths' unreimbursed expenses are not deductible as charitable contributions but are considered support they provided for Lauren.

Home for the aged. Elderly persons: Home for the aged Home: Aged, home for

If you make a lump-sum advance payment to a home for the aged to take care of your relative for life and the payment is based on that person's life expectancy, the amount of support you provide each year is the lump-sum payment divided by the relative's life expectancy. The amount of support you provide also includes any other amounts you provided during the year.

Total Support Total support

To figure if you provided more than half of a person's support, you must first determine the total support provided for that person. Total support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities.

Generally, the amount of an item of support is the amount of the expense incurred in providing that item. For lodging, the amount of support is the fair rental value of the lodging.

Expenses that are not directly related to any one member of a household, such as the cost of food for the household, must be divided among the members of the household.

Example 1.

Grace Brown, mother of Mary Miller, lives with Frank and Mary Miller and their two children. Grace gets social security benefits of $2,400, which she spends for clothing, transportation, and recreation. Grace has no other income. Frank and Mary's total food expense for the household is $5,200. They pay Grace's medical and drug expenses of $1,200. The fair rental value of the lodging provided for Grace is $1,800 a year, based on the cost of similar rooming facilities. Figure Grace's total support as follows: Fair rental value of lodging $ 1,800 Clothing, transportation and recreation 2,400 Medical expenses 1,200 Share of food (1/5 of $5,200) 1,040 Total support $6,440

The support Frank and Mary provide ($1,800 lodging + $1,200 medical expenses + $1,040 food = $4,040) is more than half of Grace's $6,440 total support.

Example 2.

Your parents live with you, your spouse, and your two children in a house you own. The fair rental value of your parents' share of the lodging is $2,000 a year ($1,000 each), which includes furnishings and utilities. Your father receives a nontaxable pension of $4,200, which he spends equally between your mother and himself for items of support such as clothing, transportation, and recreation. Your total food expense for the household is $6,000. Your heat and utility bills amount to $1,200. Your mother has hospital and medical expenses of $600, which you pay during the year. Figure your parents' total support as follows: Support provided Father Mother Fair rental value of lodging $1,000 $1,000 Pension spent for their support 2,100 2,100 Share of food (1/6 of $6,000) 1,000 1,000 Medical expenses for mother 600 Parents' total support $4,100 $4,700

You must apply the support test separately to each parent. You provide $2,000 ($1,000 lodging, $1,000 food) of your father's total support of $4,100 — less than half. You provide $2,600 to your mother ($1,000 lodging, $1,000 food, $600 medical) — more than half of her total support of $4,700. You meet the support test for your mother, but not your father. Heat and utility costs are included in the fair rental value of the lodging, so these are not considered separately.

Lodging. Lodging

If you provide a person with lodging, you are considered to provide support equal to the fair rental value of the room, apartment, house, or other shelter in which the person lives. Fair rental value includes a reasonable allowance for the use of furniture and appliances, and for heat and other utilities that are provided.

Fair rental value defined. Fair rental value

This is the amount you could reasonably expect to receive from a stranger for the same kind of lodging. It is used instead of actual expenses such as taxes, interest, depreciation, paint, insurance, utilities, cost of furniture and appliances, etc. In some cases, fair rental value may be equal to the rent paid.

If you provide the total lodging, the amount of support you provide is the fair rental value of the room the person uses, or a share of the fair rental value of the entire dwelling if the person has use of your entire home. If you do not provide the total lodging, the total fair rental value must be divided depending on how much of the total lodging you provide. If you provide only a part and the person supplies the rest, the fair rental value must be divided between both of you according to the amount each provides.

Example.

Your parents live rent free in a house you own. It has a fair rental value of $5,400 a year furnished, which includes a fair rental value of $3,600 for the house and $1,800 for the furniture. This does not include heat and utilities. The house is completely furnished with furniture belonging to your parents. You pay $600 for their utility bills. Utilities are not usually included in rent for houses in the area where your parents live. Therefore, you consider the total fair rental value of the lodging to be $6,000 ($3,600 fair rental value of the unfurnished house, $1,800 allowance for the furnishings provided by your parents, and $600 cost of utilities) of which you are considered to provide $4,200 ($3,600 + $600).

Person living in his or her own home.

The total fair rental value of a person's home that he or she owns is considered support contributed by that person.

Living with someone rent free.

If you live with a person rent free in his or her home, you must reduce the amount you provide for support by the fair rental value of lodging he or she provides you.

Property.

Property provided as support is measured by its fair market value. Fair market value is the price that property would sell for on the open market. It is the price that would be agreed upon between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts.

Capital expenses. Capital expenses

Capital items, such as furniture, appliances, and cars, that are bought for a person during the year can be included in total support under certain circumstances.

The following examples show when a capital item is or is not support.

Example 1.

You buy a $200 power lawn mower for your 13-year-old child. The child is given the duty of keeping the lawn trimmed. Because the lawn mower benefits all members of the household, you cannot include the cost of the lawn mower in the support of your child.

Example 2.

You buy a $150 television set as a birthday present for your 12-year-old child. The television set is placed in your child's bedroom. You can include the cost of the television set in the support of your child.

Example 3.

You pay $5,000 for a car and register it in your name. You and your 17-year-old daughter use the car equally. Because you own the car and do not give it to your daughter but merely let her use it, you cannot include the cost of the car in your daughter's total support. However, you can include in your daughter's support your out-of-pocket expenses of operating the car for her benefit.

Example 4.

Your 17-year-old son, using personal funds, buys a car for $4,500. You provide all the rest of your son's support — $4,000. Since the car is bought and owned by your son, the car's fair market value ($4,500) must be included in his support. Your son has provided more than half of his own total support of $8,500 ($4,500 + $4,000), so he is not your qualifying child. You did not provide more than half of his total support, so he is not your qualifying relative. You cannot claim an exemption for your son.

Medical insurance premiums. Health insurance premiums Insurance premiums: Medical Medical insurance premiums

Medical insurance premiums you pay, including premiums for supplementary Medicare coverage, are included in the support you provide.

Medical insurance benefits.

Medical insurance benefits, including basic and supplementary Medicare benefits, are not part of support.

Tuition payments and allowances under the GI Bill. Armed forces: GI Bill benefits GI Bill benefits Tuition, benefits under GI Bill

Amounts veterans receive under the GI Bill for tuition payments and allowances while they attend school are included in total support.

Example.

During the year, your son receives $2,200 from the government under the GI Bill. He uses this amount for his education. You provide the rest of his support — $2,000. Because GI benefits are included in total support, your son's total support is $4,200 ($2,200 + $2,000). You have not provided more than half of his support.

Child care expenses. Child care expenses

If you pay someone to provide child or dependent care, you can include these payments in the amount you provided for the support of your child or disabled dependent, even if you claim a credit for the payments. For information on the credit, see Publication 503, Child and Dependent Care Expenses.

Other support items.

Other items may be considered as support depending on the facts in each case.

Do Not Include in Total Support

The following items are not included in total support.

Federal, state, and local income taxes paid by persons from their own income. Taxes, not support

Social security and Medicare taxes paid by persons from their own income. Medicare taxes, not support Social security and Medicare taxes: Support, not included in

Life insurance premiums. Life insurance premiums

Insurance premiums: Life

Funeral expenses. Funeral expenses

Scholarships received by your child if your child is a full-time student. Scholarships

Survivors' and Dependents' Educational Assistance payments used for the support of the child who receives them.

Government or charitable assistance you received because of your temporary relocation due to Hurricane Katrina is not included in total support. Disregard these amounts in determining who provided a person's support. Hurricane Katrina

Multiple Support Agreement Multiple support agreement

Sometimes no one provides more than half of the support of a person. Instead, two or more persons, each of whom would be able to take the exemption but for the support test, together provide more than half of the person's support.

When this happens, you can agree that any one of you who individually provides more than 10% of the person's support, but only one, can claim an exemption for that person as a qualifying relative. Each of the others must sign a statement agreeing not to claim the exemption for that year. The person who claims the exemption must keep these signed statements for his or her records. A multiple support declaration identifying each of the others who agreed not to claim the exemption must be attached to the return of the person claiming the exemption. Form 2120, Multiple Support Declaration, can be used for this purpose.

Example 1.

You, your sister, and your two brothers provide the entire support of your mother for the year. You provide 45%, your sister 35%, and your two brothers each provide 10%. Either you or your sister can claim an exemption for your mother. The other must sign a statement agreeing not to take an exemption for your mother. The one who claims the exemption must attach Form 2120, or a similar declaration, to his or her return and must keep the statement signed by the other for his or her records. Because neither brother provides more than 10% of the support, neither can take the exemption and neither has to sign a statement.

Example 2.

You and your brother each provide 20% of your mother's support for the year. The remaining 60% of her support is provided equally by two persons who are not related to her. She does not live with them. Because more than half of her support is provided by persons who cannot claim an exemption for her, no one can take the exemption.

Example 3.

Your father lives with you and receives 25% of his support from social security, 40% from you, 24% from his brother (your uncle), and 11% from a friend. Either you or your uncle can take the exemption for your father if the other signs a statement agreeing not to. The one who takes the exemption must attach Form 2120, or a similar declaration, to his return and must keep for his records the signed statement from the one agreeing not to take the exemption.

Support Test for Children of Divorced or Separated Parents

In most cases, a child of divorced or separated parents will be a qualifying child of one of the parents. See Children of divorced or separated parents under Qualifying Child, earlier. However, if the child does not meet the requirements to be a qualifying child of either parent, the child may be a qualifying relative of one of the parents. In that case, the following rules must be used in applying the support test.

A child will be treated as being the qualifying relative of his or her noncustodial parent if all of the following apply.

The parents:

Are divorced or legally separated under a decree of divorce or separate maintenance,

Are separated under a written separation agreement, or

Lived apart at all times during the last 6 months of the year.

The child received over half of his or her support for the year from the parents.

The child is in the custody of one or both parents for more than half of the year.

Written declaration.

The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration.

Custodial parent and noncustodial parent.

The custodial parent is the parent with whom the child lived for the greater part of the year. The other parent is the noncustodial parent.

Example.

Your child lived with you for 10 months of the year. The child lived with your former spouse for the other 2 months. You are considered the custodial parent.

Child support under pre-1985 agreement. Child support under pre-1985 agreement

All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child.

Example.

Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support.

Alimony. Alimony

Payments to a spouse that are includible in the spouse's gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent.

Parents who never married.

This special rule for divorced or separated parents also applies to parents who never married.

Multiple support agreement.

If the support of the child is determined under a multiple support agreement, this special support test for divorced or separated parents does not apply.

<ROM>Worksheet 1.</ROM> <IMARK>Worksheet for Determining Support Funds Belonging to the Person You Supported 1. Enter the total funds belonging to the person you supported, including income received (taxable and nontaxable) and amounts borrowed during the year, plus the amount in savings and other accounts at the beginning of the year 1. 2. Enter the amount on line 1 that was used for the person's support 2. 3. Enter the amount on line 1 that was used for other purposes 3. 4. Enter the total amount in the person's savings and other accounts at the end of the year 4. 5. Add lines 2 through 4. (This amount should equal line 1.) 5. Expenses for Entire Household (where the person you supported lived) 6. Lodging (complete line 6a or 6b): 6a. Enter the total rent paid 6a. 6b. Enter the fair rental value of the home. If the person you supported owned the home, also include this amount in line 21. 6b. 7. Enter the total food expenses 7. 8. Enter the total amount of utilities (heat, light, water, etc. not included in line 6a or 6b) 8. 9. Enter the total amount of repairs (not included in line 6a or 6b) 9. 10. Enter the total of other expenses. Do not include expenses of maintaining the home, such as mortgage interest, real estate taxes, and insurance. 10. 11. Add lines 6a through 10. These are the total household expenses 11. 12. Enter total number of persons who lived in the household 12. Expenses for the Person You Supported 13. Divide line 11 by line 12. This is the person's share of the household expenses 13. 14. Enter the person's total clothing expenses 14. 15. Enter the person's total education expenses 15. 16. Enter the person's total medical and dental expenses not paid for or reimbursed by insurance 16. 17. Enter the person's total travel and recreation expenses 17. 18. Enter the total of the person's other expenses 18. 19. Add lines 13 through 18. This is the total cost of the person's support for the year 19. Did the Person Provide More Than Half of His or Her Own Support? 20. Multiply line 19 by 50% (.50) 20. 21. Enter the amount from line 2, plus the amount from line 6b if the person you supported owned the home. This is the amount the person provided for his or her own support 21. 22. Is line 21 more than line 20?

No. You meet the support test for this person to be your qualifying child. If this person also meets the other tests to be a qualifying child, stop here; do not complete lines 23–26. Otherwise, go to line 23 and fill out the rest of the worksheet to determine if this person is your qualifying relative.

Yes. You do not meet the support test for this person to be either your qualifying child or your qualifying relative. Stop here.

Did You Provide More Than Half? 23. Enter the amount others provided for the person's support. Include amounts provided by state, local, and other welfare societies or agencies. Do not include any amounts included on line 1. 23. 24. Add lines 21 and 23 24. 25. Subtract line 24 from line 19. This is the amount you provided for the person's support 25. 26. Is line 25 more than line 20?

Yes. You meet the support test for this person to be your qualifying relative.

No. You do not meet the support test for this person to be your qualifying relative. You cannot claim an exemption for this person unless you can do so under a multiple support agreement or the support test for children of divorced or separated parents. See Multiple Support Agreement or Support Test for Children of Divorced or Separated Parents.

Tables and figures: Worksheets Worksheets: Support test Phaseout of Exemptions Exemptions: Phaseout

The amount you can claim as a deduction for exemptions is phased out once your adjusted gross income (AGI) goes above a certain level for your filing status. These levels are as follows: AGI Level Which Reduces Filing Status Exemption Amount Married filing separately $109,475 Single 145,950 Head of household 182,450 Married filing jointly 218,950 Qualifying widow(er) 218,950

You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero.

If your AGI exceeds the level for your filing status, use worksheet 2 to figure the amount of your deduction for exemptions.

<ROM>Worksheet 2. </ROM> <IMARK>Worksheet for Determining the Deduction for Exemptions 1. Is the amount on Form 1040, line 38, or Form 1040A, line 22, more than the amount on line 4 below for your filing status? □ No. Stop. Multiply $3,200 by the total number of exemptions claimed on line 6d of Form 1040 or Form 1040A and enter the result on Form 1040, line 42, or Form 1040A, line 26. □ Yes. Continue. 2. Multiply $3,200 by the total number of exemptions claimed on line 6d of Form 1040 or Form 1040A. 2. 3. Enter the amount from Form 1040, line 38, or Form 1040A, line 22 3. 4. Enter the amount shown below for your filing status:
Married filing separately—$109,475

Single—$145,950

Head of household—$182,450

Married filing jointly or Qualifying widow(er)—$218,950
4. 5. Subtract line 4 from line 3. If the result is more than $122,500 ($61,250 if married filing separately), stop here. You cannot take a deduction for exemptions.. 5. 6. Divide line 5 by $2,500 ($1,250 if married filing separately). If the result is not a whole number, round it up to the next higher whole number 6. 7. Multiply line 6 by 2% (.02) and enter the result as a decimal 7. 8. Multiply line 2 by line 7 8 9. Deduction for exemptions. Subtract line 8 from line 2. Enter the result here and on Form 1040, line 42, or Form 1040A, line 26 9.

Exemptions: Deduction for exemptions, determination of (Worksheet 2) Worksheets: Deduction for exemptions, determination of

Social Security Numbers for Dependents Children: Social security number Dependents: Social security number Form 1040: Social security numbers Form 1040A: Social security numbers Social security numbers (SSNs): Child's Social security numbers (SSNs): Dependents SSNs Social security numbers (SSNs)

You must list the social security number (SSN) of any dependent for whom you claim an exemption in column (2) of line 6c of your Form 1040 or Form 1040A.

Divorced taxpayers: Child custody: Divorced taxpayers: Separated taxpayers:

If you do not list the dependent's SSN when required or if you list an incorrect SSN, the exemption may be disallowed.

No SSN. Form SS-5: Social Security Number request

If a person for whom you expect to claim an exemption on your return does not have an SSN, either you or that person should apply for an SSN as soon as possible by filing Form SS-5, Application for a Social Security Card, with the Social Security Administration (SSA). Information about applying for an SSN and Form SS-5 is available at your local SSA office.

It usually takes about 2 weeks to get an SSN. If you do not have a required SSN by the filing due date, you can file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, for an extension of time to file.

Born and died in 2005. Dependents: Born and died within year

If your child was born and died in 2005, and you do not have an SSN for the child, you may attach a copy of the child's birth certificate instead. If you do, enter DIED in column (2) of line 6c of your Form 1040 or Form 1040A.

Alien or adoptee with no SSN.

If your dependent does not have and cannot get an SSN, you must list the individual taxpayer identification number (ITIN) or adoption taxpayer identification number (ATIN) instead of an SSN.

Taxpayer identification numbers for aliens. Aliens Nonresident Nonresident aliens Dependents: Social Security Number: Alien dependents Form W-7: Individual taxpayer identification number request Individual taxpayer identification numbers (ITINs) ITINs (Individual taxpayer identification numbers) Nonresident aliens: Dependents

If your dependent is a resident or nonresident alien who does not have and is not eligible to get an SSN, your dependent must apply for an individual taxpayer identification number (ITIN). For details on how to apply, see Form W-7, Application for IRS Individual Taxpayer Identification Number.

Taxpayer identification numbers for adoptees. Adoption: Taxpayer identification number ATINs (Adoption taxpayer identification numbers) Children Adoption Adoption Dependents: Social Security Number: Adoption taxpayer identification number Form W-7A: Adoption taxpayer identification number request

ExemptionsIf you have a child who was placed with you by an authorized placement agency, you may be able to claim an exemption for the child. However, if you cannot get an SSN or an ITIN for the child, you must get an adoption taxpayer identification number (ATIN) for the child from the IRS. See Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, for details.

Standard Deduction Deductions Standard deduction Standard deduction

Most taxpayers have a choice of either taking a standard deduction or itemizing their deductions. The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. It is a benefit that eliminates the need for many taxpayers to itemize actual deductions, such as medical expenses, charitable contributions, and taxes, on Schedule A of Form 1040. The standard deduction is higher for taxpayers who are 65 or older or blind. If you have a choice, you can use the method that gives you the lower tax.

You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions.

Persons not eligible for the standard deduction. Standard deduction: Persons not eligible

Your standard deduction is zero and you should itemize any deductions you have if:

You are married, filing a separate return, and your spouse itemizes deductions,

You are filing a tax return for a short tax year because of a change in your annual accounting period, or

You are a nonresident or dual-status alien during the year. You are considered a dual-status alien if you were both a nonresident and resident alien during the year.

If you are a nonresident alien who is married to a U.S. citizen or resident at the end of the year, you can choose to be treated as a U.S. resident. (See Publication 519.) If you make this choice, you can take the standard deduction.

If an exemption for you can be claimed on another person's return (such as your parents' return), your standard deduction may be limited. See Standard Deduction for Dependents, later.

Standard Deduction Amount Standard deduction: Amount

The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. Generally, the standard deduction amounts are adjusted each year for inflation. The standard deduction amounts for most taxpayers for 2005 are shown in Table 7.

The amount of the standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed.

Higher Standard Deduction for Age (65 or Older) Age: Standard deduction for age 65 or older Elderly persons: Standard deduction for age 65 or older Married taxpayers: Age 65 or older spouse, standard deduction Standard deduction: Age 65 or older

If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. You are considered 65 on the day before your 65th birthday.

Therefore, you can take a higher standard deduction for 2005 if you were born before January 2, 1941.

Use Table 8 to figure the standard deduction amount.

Higher Standard Deduction for Blindness Blind persons: Standard deduction for Married taxpayers: Blind spouse, standard deduction Standard deduction: Blind persons

If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. Use Table 8. You qualify for this benefit if you are totally or partly blind.

Partly blind.

If you are partly blind, you must get a certified statement from an eye doctor or registered optometrist that:

You cannot see better than 20/200 in the better eye with glasses or contact lenses, or

Your field of vision is not more than 20 degrees.

If your eye condition will never improve beyond these limits, the statement should include this fact. You must keep the statement in your records.

If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify.

Spouse 65 or Older or Blind Married taxpayers: Age 65 or older spouse, standard deduction Married taxpayers: Blind spouse, standard deduction

You can take the higher standard deduction if your spouse is age 65 or older or blind and:

You file a joint return, or

You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption for your spouse could not be claimed by another taxpayer.

You cannot claim the higher standard deduction for an individual other than yourself and your spouse.

Examples

The following examples illustrate how to determine your standard deduction using Tables 7and 8.

Example 1.

Larry, 46, and Donna, 33, are filing a joint return for 2005. Neither is blind. They decide not to itemize their deductions. They use Table 7. Their standard deduction is $10,000.

Example 2.

Assume the same facts as in Example 1, except that Larry is blind at the end of 2005. Larry and Donna use Table 8. Their standard deduction is $11,000.

Example 3.

Bill and Terry are filing a joint return for 2005. Both are over age 65. Neither is blind. If they do not itemize deductions, they use Table 8. Their standard deduction is $12,000.

Standard Deduction for Dependents Dependents: Standard deduction for Standard deduction: Dependents

The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally limited to the greater of:

$800, or

The individual's earned income for the year plus $250 (but not more than the regular standard deduction amount, generally $5,000).

However, if the individual is 65 or older or blind, the standard deduction may be higher.

If an exemption for you (or your spouse if you are married filing jointly) can be claimed on someone else's return, use Table 9 to determine your standard deduction.

Earned income defined. Earned income: Defined for purposes of standard deduction Standard deduction: Earned income defined

Earned income is salaries, wages, tips, professional fees and other amounts received as pay for work you actually perform.

ScholarshipsFor purposes of the standard deduction, earned income also includes any part of a scholarship or fellowship grant that you must include in your gross income. See chapter 1 of Publication 970 for more information on what qualifies as a scholarship or fellowship grant.

Example 1.

Michael is single. His parents claim an exemption for him on their 2005 tax return. He has interest income of $780 and wages of $150. He has no itemized deductions. Michael uses Table 9 to find his standard deduction. He enters $150 (his earned income) on line 1, $400 ($150 plus $250) on line 3, $800 (the larger of $400 and $800) on line 5, and $5,000 on line 6. The amount of his standard deduction, on line 7a, is $800 (the smaller of $800 and $5,000).

Example 2.

Joe, a 22-year-old full-time college student, is claimed on his parents' 2005 tax return. Joe is married and files a separate return. His wife does not itemize deductions on her separate return.

Joe has $1,500 in interest income and wages of $3,800. He has no itemized deductions. Joe finds his standard deduction by using Table 9. He enters his earned income, $3,800, on line 1. He adds lines 1 and 2 and enters $4,050 on line 3. On line 5 he enters $4,050, the larger of lines 3 and 4. Since Joe is married filing a separate return, he enters $5,000 on line 6. On line 7a he enters $4,050 as his standard deduction because it is smaller than $5,000, the amount on line 6.

Example 3.

Amy, who is single, is claimed on her parents' 2005 tax return. She is 18 years old and blind. She has interest income of $1,300 and wages of $2,900. She has no itemized deductions. Amy uses Table 9 to find her standard deduction. She enters her wages of $2,900 on line 1. She adds lines 1 and 2 and enters $3,150 on line 3. On line 5 she enters $3,150, the larger of lines 3 and 4. Since she is single, Amy enters $5,000 on line 6. She enters $3,150 on line 7a. This is the smaller of the amounts on lines 5 and 6. Because she checked one box in the top part of the worksheet, she enters $1,250 on line 7b. She then adds the amounts on lines 7a and 7b and enters her standard deduction of $4,400 on line 7c.

Who Should Itemize Itemized deductions: Choosing to itemize Standard deduction: Comparison with itemized deduction amount

You should itemize deductions if your total deductions are more than the standard deduction amount. Also, you should itemize if you do not qualify for the standard deduction, as discussed earlier under Persons not eligible for the standard deduction.

You should first figure your itemized deductions and compare that amount to your standard deduction to make sure you are using the method that gives you the greater benefit.

Form 1040, Schedule A: Itemized deduction limit Itemized deductions: Limits on Limit on itemized deductions

You may be subject to a limit on some of your itemized deductions if your adjusted gross income (AGI) is more than $145,950 ($72,975 if you are married filing separately). See the instructions for Schedule A (Form 1040), line 28, for more information on figuring the correct amount of your itemized deductions.

When to itemize. Itemized deductions: When to itemize

You may benefit from itemizing your deductions on Schedule A (Form 1040) if you:

Do not qualify for the standard deduction, or the amount you can claim is limited,

Had large uninsured medical and dental expenses during the year,

Paid interest and taxes on your home,

Had large unreimbursed employee business expenses or other miscellaneous deductions,

Had large uninsured casualty or theft losses,

Made large contributions to qualified charities, or

Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.

If you decide to itemize your deductions, complete Schedule A and attach it to your Form 1040. Enter the amount from Schedule A, line 28, on Form 1040, line 40.

Electing to itemize for state tax or other purposes. Amended returns: Change from itemized to standard deduction (or vice versa) Local income taxes: Itemized deductions State or local income taxes: Itemized deductions

Even if your itemized deductions are less than the amount of your standard deduction, you can elect to itemize deductions on your federal return rather than take the standard deduction. You may want to do this, for example, if the tax benefit of being able to itemize your deductions on your state tax return is greater than the tax benefit you lose on your federal return by not taking the standard deduction. To make this election, you must check the box on line 29 of Schedule A.

Changing your mind. Amended returns: Form 1040X Form 1040X: Itemized deductions, change to standard deduction Form 1040X: Standard deduction, change to itemized deductions Itemized deductions: Changing from standard to itemized deduction (or vice versa) Married filing separately: Changing method from or to itemized deductions Separate returns Married filing separately Standard deduction: Changing from itemized to standard deduction (or vice versa) Tax returns Amended Form 1040X

If you do not itemize your deductions and later find that you should have itemized — or if you itemize your deductions and later find you should not have — you can change your return by filing Form 1040X.

Married persons who filed separate returns. Itemized deductions: Married filing separately Married filing separately: Itemized deductions

You can change methods of taking deductions only if you and your spouse both make the same changes. Both of you must file a consent to assessment for any additional tax either one may owe as a result of the change.

Standard deductionYou and your spouse can use the method that gives you the lower total tax, even though one of you may pay more tax than you would have paid by using the other method. You both must use the same method of claiming deductions. If one itemizes deductions, the other should itemize because he or she will not qualify for the standard deduction. See Persons not eligible for the standard deduction, earlier.

2005 Standard Deduction Tables Dependents: Standard deduction for: Worksheet (Table 9) Standard deduction: Tables and figures 2005 changes Tables and figures: Standard deduction: Age 65 or older or blind (Table 8) Tables and figures: Standard deduction: Dependents, worksheet for (Table 9) Tables and figures: Standard deduction: Most people (Table 7) Worksheets: Standard deduction

If you are married filling a separate return and your spouse itemizes deductions, or if you are a dual-status alien, you cannot take the standard deduction even if you were born before January 2, 1941, or you are blind.

<ROM>Table 7.</ROM> <IMARK>Standard Deduction Chart for Most People* If your filing status is... Your standard deduction is: Single or Married filing separately $5,000 Married filing jointly or Qualifying widow(er) with dependent child 10,000 Head of household 7,300

*Do not use this chart if you were born before January 2, 1941 or you are blind, or if someone else can claim an exemption for you (or your spouse if married filing jointly). Use Table 8 or 9 instead.

<ROM>Table 8.</ROM> <IMARK>Standard Deduction Chart for People Born Before January 2, 1941, or Who are Blind* Check the correct number of boxes below. Then go to the chart. You Born before January 2, 1941 Blind Your spouse, if claiming spouse's exemption Born before January 2, 1941 Blind Total number of boxes you checked IF your filing status is... AND the number in the box above is... THEN your standard deduction is... Single 1 $6,250 2 7,500 Married filing jointly 1 11,000 or Qualifying 2 12,000 widow(er) with 3 13,000 dependent child 4 14,000 Married filing 1 6,000 separately 2 7,000 3 8,000 4 9,000 Head of household 1 8,550 2 9,800

*If someone can claim an exemption for you (or your spouse if married filing jointly), use Table 9, instead.

<ROM>Table 9.</ROM> <IMARK>Standard Deduction Worksheet for DependentsUse this worksheet only if someone else can claim an exemption for you (or your spouse if married filing jointly). If you were born before January 2, 1941, or you are blind, check the correct number of boxes below. Then go to the worksheet. You Born before January 2, 1941 Blind Your spouse, if claiming spouse's exemption Born before January 2, 1941 Blind Total number of boxes you checked

1. Enter your earned income (defined below). If none, enter -0-. 1. 2. Additional amount 2. $250 3. Add lines 1 and 2. 3. 4. Minimum standard deduction. 4. $800 5. Enter the larger of line 3 or line 4. 5. 6. Enter the amount shown below for your filing status. • Single or Married filing separately— $5,000 6. • Married filing jointly or Qualifying widow(er) with dependent child—$10,000 • Head of household—$7,300 7. Standard deduction. a. Enter the smaller of line 5 or line 6. If born after January 1, 1941, and not blind, stop here. This is your standard deduction. Otherwise, go on to line 7b. 7a. b. If born before January 2, 1941, or blind, multiply $1,250 ($1,000 if married or qualifying widow(er) with dependent child) by the number in the box above. 7b. c. Add lines 7a and 7b. This is your standard deduction for 2005. 7c.

Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. It also includes any amount received as a scholarship that you must include in your income.

How To Get Tax Help More information Tax help Free tax services Tax help Help Tax help Assistance Tax help Publications Tax help TTY/TDD information

You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.

Contacting your Taxpayer Advocate. Taxpayer Advocate

If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate.

The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review.

To contact your Taxpayer Advocate:

Call the Taxpayer Advocate toll free at 1-877-777-4778.

Call, write, or fax the Taxpayer Advocate office in your area.

Call 1-800-829-4059 if you are a TTY/TDD user.

Visit www.irs.gov/advocate.

For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish).

Free tax services.

To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains a list of free tax publications and an index of tax topics. It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics.

Internet. You can access the IRS website 24 hours a day, 7 days a week, at www.irs.gov to:

E-file your return. Find out about commercial tax preparation and e-file services available free to eligible taxpayers.

Check the status of your 2005 refund. Click on Where's My Refund. Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2005 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.

Download forms, instructions, and publications.

Order IRS products online.

Research your tax questions online.

Search publications online by topic or keyword.

View Internal Revenue Bulletins (IRBs) published in the last few years.

Figure your withholding allowances using our Form W-4 calculator.

Get information on starting and operating a small business.

Phone. Many services are available by phone.

Ordering forms, instructions, and publications. Call 1-800-829-3676 to order current-year forms, instructions, and publications and prior-year forms and instructions. You should receive your order within 10 days.

Asking tax questions. Call the IRS with your tax questions at 1-800-829-1040.

Solving problems. You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Call your local Taxpayer Assistance Center for an appointment. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.

TTY/TDD equipment. If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications.

TeleTax topics. Call 1-800-829-4477 and press 2 to listen to pre-recorded messages covering various tax topics.

Refund information. If you would like to check the status of your 2005 refund, call 1-800-829-4477 and press 1 for automated refund information or call 1-800-829-1954. Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). Have your 2005 tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund.

Evaluating the quality of our telephone services. To ensure that IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. One method is for a second IRS representative to sometimes listen in on or record telephone calls. Another is to ask some callers to complete a short survey at the end of the call.

Walk-in. Many products and services are available on a walk-in basis.

Products. You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD-ROM or photocopy from reproducible proofs. Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes.

Services. You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you're more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. No appointment is necessary, but if you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. To find the number, go to www.irs.gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service.

Mail. You can send your order for forms, instructions, and publications to the address below and receive a response within 10 business days after your request is received. National Distribution Center P.O. Box 8903 Bloomington, IL 61702-8903

CD-ROM for tax products. You can order Publication 1796, IRS Tax Products CD-ROM, and obtain:

A CD that is released twice so you have the latest products. The first release ships in late December and the final release ships in late February.

Current-year forms, instructions, and publications.

Prior-year forms, instructions, and publications.

Tax Map: an electronic research tool and finding aid.

Tax law frequently asked questions (FAQs).

Tax Topics from the IRS telephone response system.

Fill-in, print, and save features for most tax forms.

Internal Revenue Bulletins.

Toll-free and email technical support.

Buy the CD-ROM from National Technical Information Service (NTIS) at www.irs.gov/cdorders for $25 (no handling fee) or call 1-877-233-6767 toll free to buy the CD-ROM for $25 (plus a $5 handling fee).

CD-ROM for small businesses. Publication 3207, The Small Business Resource Guide CD-ROM for 2005, has a new look and enhanced navigation features. This year's CD includes:

Helpful information, such as how to prepare a business plan, find financing for your business, and much more.

All the business tax forms, instructions, and publications needed to successfully manage a business.

Tax law changes for 2005.

IRS Tax Map to help you find forms, instructions, and publications by searching on a keyword or topic.

Web links to various government agencies, business associations, and IRS organizations.

Rate the Product survey—your opportunity to suggest changes for future editions.

An updated version of this CD is available each year in early April. You can get a free copy by calling 1-800-829-3676 or by visiting www.irs.gov/smallbiz.

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