Question about the new credit for other dependents

[Gildardo]

I have a client that on previous years had claimed his father as his dependent. His father lives in Mexico, he doesn't have a SSN he has an ITIN. He doesn't have any income and doesn't receive a pension. He is the only one support him and he does support him more than 50%.

Does he qualifies for this new credit for other dependent? Otherwise with the removal of the exemptions I do not see any benefit to claim him anymore.

Thank you.

[TaxGuyBill · Accepted solution]

No, the dependent needs to be a citizen or resident of the US to qualify for the $500 credit.

However, claiming the dependent may still have benefits.  A few of the possibilities are (1) could qualify for Head of Household, (2) medical expenses would be deductible, (3) household size would be increased for the Premium Tax Credit, and (4) there may be State benefits.  There are likely other things as well (I think there is at least one other thing that I am forgetting).

[Gildardo]

Big change. Thank you for your very complete answer. What will happen if the father lived with him the whole year? Will that qualify him as resident or he needs to be an actual card holder?

[TaxGuyBill]

If the dependent meets the Substantial Presence Test (such a living in the US for at least 183 days during the year), that dependent is a Resident of the US, and would therefore qualify for the $500 credit (assuming all other requirements are met).  But you said the father lives in Mexico, so it seems like that does not apply.

[Gildardo]

Thank you again. I just want to be sure I fully understand the regulations for this new credit.

[Gildardo]

I have one last option, I promise. I just want to be sure about this one. What will happen if the father is a US Citizen but lives in Mexico the whole year. He will qualify for the $500 new credit for other dependents right? I'm really sorry about taking too much of your time.

[TaxGuyBill]

Yes, that is correct.  As long as he is a US Citizen or Resident, he would qualify for the $500 credit.

No problem about asking the followup questions.  With all of the new changes, we are all trying to figure things out.

[taxiowa]

But if he is a US Citizen he would have a SS#.  Correct?

[TaxGuyBill]

I don't know.  If a non-citizen with an ITIN becomes a Citizen, do they immediately issue a SSN in connection with becoming a Citizen?

[taxiowa]

Good question but I think they do.

[Gildardo]

Yes. If the father is a Citizen and now has a SS# but still lives in Mexico.

[taxiowa]

It has only been a day since you said he only had an ITIN.  Now he has a SS# already?  Government must be back from shutdown.

[Gildardo]

He wants to use the $500 credit for the immigration fees.

[TaxGuyBill]

But if he is NOT a US Citizen with a Social Security number, he does NOT qualify for the $500 credit (and if he was a US Citizen, he doesn't need to immigrate).

[Gildardo]

Yeah your right. This is client is giving me a headache.

[IRonMaN]

You mean your "former client" was giving you a headache? :wink:

[info4]

Conclusively the answer is No.

The only thing I would modify to the prior answer is the portion "resident" includes Canada and Mexico. There is no physical presence in the U.S. to qualify for the credit but the ODC follows the CTC residency requirement rules which require that the taxpayer lived with the dependent all year in the United States which includes any country that is contiguous (Mexico and Canada). Therefore, if your dependent lived with the relative in Mexico and such dependent is a U.S. citizen or meets the green card test, possesses a valid social security card by the time the due date of the return, the person would qualify for the ODC. But I agree with the rest of the answer and also add that certain states have not modified the exemption rules and thus could find a larger return. I would not scratch them out from their individual return if they meet the dependent rules.

Previous answer: No, the dependent needs to be a citizen or resident of the US to qualify for the $500 credit.

However, claiming the dependent may still have benefits. A few of the possibilities are (1) could qualify for Head of Household, (2) medical expenses would be deductible, (3) household size would be increased for the Premium Tax Credit, and (4) there may be State benefits. There are likely other things as well (I think there is at least one other thing that I am forgetting).

[TaxGuyBill]

No, the $500 credit is only if your are a Resident (or Citizen) of the US.  Although Residents of Canada and Mexico qualify to be a dependent, they do NOT qualify for the $500 credit.

Also, there is NOT a requirement for the dependent to live with you for 6 months.

[info4]

I would suggest you revise IRC Sec. 152(b) for your clarification.

[TaxGuyBill]

I would suggest you revisit IRC Section 24(h)(4)(B).

(B) Exception for certain noncitizens
Subparagraph (A) shall not apply with respect to any individual who would not be a dependent if subparagraph (A) of section 152(b)(3) were applied without regard to all that follows “resident of the United States”.
https://www.law.cornell.edu/uscode/text/26/24#h

[info4]

Correct. Resident of the United States does not require physical presence in the country of United States, it EXTENDS the presence requirement to any country that is contiguous to the U.S. per 152(b). You have cited the law correctly you jut needed to extend its application of the law by asserting 152(b)(3) to your definition.  

[TaxGuyBill]

What presence requirement are you talking about?  There is no presence requirement for the Child Tax Credit (including the $500 'other dependent' credit).

In order to get the $500 credit, a person must be classified as a Citizen, National or Resident of the United States.  A Citizen, National or Resident of Mexico or Canada would NOT get the $500 credit (unless they are also a Citizen, National, or Resident of the United States).