Dependency Exemption Rules
Evaluating and entering the appropriate number of exemptions is a significant component of fulfilling the taxpayer’s return since a taxpayer is capable of claiming one exemption for every qualified dependent on their return; thus, lowering their taxable income. On the other perspective, dependents are considered as either a qualifying teenage or a qualifying relative of the taxpayer. The taxpayer’s spouse cannot be regarded as a dependent, however, can be claimed as a personal exemption with some example of dependents including a teenage, stepchild, brother, sister, or a parent (Overesch & Wamser, 2010). Therefore, according to Susie’s scenario, she is correct when she claims the cousin as a dependent and leaving behind her daughter who is less the same age as her cousin.
According to the internal revenue service rules, a child and adult relatives can be grouped as dependents if only they meet the revenue’s test thus qualifying as a dependent. On the same note, a relative can be defined in this case as a person who has lived with an individual for the whole year as a member of his or her household hence meeting the definition of a qualifying relative even if he or she is not related to him or her by blood or marriage. Therefore, this definition makes Susie’s cousin a dependent and leaving out her daughter. As children get older, they usually become more self-dependent and independent from the parents; thus, removing them from the bracket. In several occasions, one will also lose the ability to claim them as a dependent on the tax returns; therefore, if a child is over 18, or over 24 then one cannot argue her as a qualifying child any further (Overesch & Wamser, 2010). Even though, if Susie meets the rules to claim her daughter as a qualified, then she can still claim her as a dependent.
Overesch, M., & Wamser, G. (2010). Corporate tax planning and thin-capitalization rules: evidence from a quasi-experiment. Applied Economics, 42(5), 563-573.