More Filing Status, Dependent Issue, EIC

[S T]

I know this one is coming in soon!

Single Mom, with dependent child, living on their own. In the past we have filed HOH, claiming dependent child and received small EIC.

Situation changes for 2006! Single Mom (on W-2 income $28,000) with dependent child moves into Single Mom's parent's home.

Single Mom pays $300 month for contribution to household. Single Mom's Parent's pay rest of household expenses for both t/p and child.

So now what is Single Mom's filing status? Doesn't she lose HOH, who claims the dependent child? What about EIC??? Then we have childcare as well?

Sandy

[DonPriebe]

The correct answer is do the support worksheet ...

to see who provides more than half the cost for keeping up the household. But at only $300 a month, I would bet grandma wins.

So you file mom as single. Since the child is a qualifying child of both mother and grandma, they get to choose who claimes her. That one person (either mom or grandma) gets dependency, EIC and child tax credit - no more splitting the child.

[jainen]

The support worksheet

>do the support worksheet to see who provides more than half the cost for keeping up the household<<

The support worksheet is not suitable for Head of Household calculation, because it uses Fair Rental Value instead of actual costs. For example, suppose the rental value of the house is $1200 but Grandma owns it free & clear. Mother pays $300 for all the food & utilities, which is enough for Head of Household even though the support worksheet allocates $400 per person to Grandma.