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3. Mr. and Mrs. O file a joint income tax return. Determine whether each of the...

3. Mr. and Mrs. O file a joint income tax return. Determine whether each of the following unmarried individuals is either a qualifying child or a qualifying relative for purposes of the $2,000 child tax credit or the $500 dependent tax credit.

a) Son Jack, age 20, lives in his parents’ home and works full-time as an auto mechanic, earning $50,000 annually. Jack is self-supporting except for the fact that he does not pay rent to his parents.

b) Daughter Brenda, age 22, is a full-time college student. Brenda lives in a dormitory during the school year, but her parents’ home is her permanent residence and her parents provide 100 percent of her financial support. She earned $5,000 during the year.

c) Nephew Eddie, age 16, has lived in Mr. And Mrs. O’s home since 2008. Eddie is a high school student who earned $6,690 this summer working for a plumber. Since his aunt and uncle provide 100 percent of his financial support, Eddie is saving his earnings for college.

d) Mr. O’s mother Mildred, age 64, lives in a retirement community. Mr. and Mrs. O provide about 65 percent of her financial support. Mildred earned $6,000 this year as a part-time librarian.

e) Mrs. O’s father, Richard, age 76, has lived in Mr. and Mrs. O’s home since 2010. Mr. and Mrs. O provide about 30 percent of his financial support. The rest of his support comes from social security.

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Answer #1

A) Son Jack is not a qualifying child for the purpose of child tax credit as his age at the time of filling return is more than 17 years nor he is a qualifying dependent relative as he is self-supportive with an annual income of $50,000.

B) Daughter Brenda is a qualifying dependent relative for the purpose of $500 tax credit as she is a full time student and her parents provide her 100 percent financial support(Also her permanent residence is her parent’s home).

C) Nephew Eddie is a qualifying child for the purpose of claiming child tax credit of $2000 as he qualifies age limit of under 17 years and Mr. and Mrs. O provides 100 percent of his financial support . Also he is living at the same place.

D) Mr. O’s mother Mildred doesn’t qualify as a dependent relative as her annual income is more than the exemption limit of $4200.

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