head of household of disabled adult child

[Greta]

Client keeps home for her adult mentally challenged child who has a trust fund set up by deceased parent. Client does not use these funds and contributes only own money for entire household, for she wants to conserve the trust fund for after she passes. Her child files own tax return on the earnings of the trust and on her $2,000 W-2 at an organization for the mentally challenged. 1) Is parent a head of household without claiming a dependent; 2) Can child claim EIC on her W-2 earnings.

[BobKamman]

Age and AGI of "child" ?

[Greta]

The disabled "child" is 35. AGI is $7K dividends + $2K W-2. But, oops, I forgot, the social security benefits are 22K. So that clearly makes for single filing status.

[Greta]

The disabled "child" is 35. AGI is $7K dividends + $2K W-2. But, oops, I forgot, the social security benefits are 22K. So that clearly makes for single filing status.

[TaxGuyBill]

The Social Security Benefits don't DIRECTLY affect anything.

You seem to have indicated the parent paid for all household costs.  Did the 'child' pay for over half of his own support?

[Greta]

That's a good point. I know the trust income is not used. I assumed the SS benefits are more liquid and accessible, but I will ask. So perhaps the parent can still be considered HH rather than single. It makes a pretty big difference in tax liability.

[jeffmcpa2010]

you might try this tool from the IRS.

https://www.irs.gov/help/ita/what-is-my-filing-status

I haven't used the filing status one much, but do use the who is a dependent tool several times a year when I get myself confused trying to read the rules again. Also you can print out the answer at the end for documentation in your file as to how your reached the conclusion you use on the return.

[Greta]

I just tried the (lengthy) link you provided. Perhaps my brain will work it better in the morning. I think the key for me is to ask whose money was used to give over 1/2 support. If my client's disabled daughter uses her SS benefits for her own desires or entertainment, does that count as part of her support? But if the mother puts aside these funds toward her daughter's future needs (say, after she passes) then she should be able to file as HH.

[jeffmcpa2010]

I think you have got the key point.  Does the child spend more on her own support than Mom does.

[Terry53029]

To file as HH you must claim qualifying child as dependent unless you are using the rules for divorced parents. If your client claims her child, then child not eligible for EITC

[Greta]

The child is disabled and is now 35 yrs old. Mother does not claim her as a dependent, just HH status. Since daughter is not a dependent and earns $2K minimal at a non-profit organization, I thought that would qualify for EIC.

[jeffmcpa2010]

please keep in mind that the distinction is "Can another person(mother) claim her as a dependent" not "Does another person claim her as a dependent".  

[Greta]

But mother cannot claim daughter as a dependent. Her trust income and the 2K she earns bring her over the AGI limit. No?

[jeffmcpa2010]

Here is the link for the interactive determination for a dependent.

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

I believe that with the disability that AGI may not come into play, the determination may all fall on who provides over 1/2 of the support.

[George4Tacks]

VITA does these all day long

https://members.actorsequity.org/benefits/vita/vita-worksheets.pdf

https://apps.irs.gov/app/vita/content/globalmedia/head_of_household_qualifying_person_4012.pdf

https://apps.irs.gov/app/vita/content/globalmedia/table_2_dependency_exemption_relative_4012.pdf

https://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

I would never volunteer for VITA. These are tough returns to figure out. 

[BobKamman]

There is no gross income test for a qualifying child.  She can be a QC at any age if she is permanently and totally disabled.  

Are distributions being made to her from the trust?  I would think that it should have been set up as a complex trust, and the funds allowed to accumulate if not needed for support.  

[Terry53029 · Accepted solution]

Your client cannot file HOH if she cannot claim a dependent. See # 5

To have a qualifying child, income does not come into play Only requirement as to income is THE CHILD DOES NOT PROVIDE OVER 50% OF THEIR SUPPORT

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.

1. You file a separate return. A separate return includes a return claiming married filing separately, single, or head of household filing status.

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

3. Your spouse didn't 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.

4. Your home was the main home of your child, stepchild, or 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.)

5. You must be able to claim the child as a dependent. However, you meet this test if you can't claim the child as a dependent only because the noncustodial parent can claim the child using the rules described, later, in Children of divorced or separated parents (or parents who live apart) under Qualifying Child or in Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) under Qualifying Relative. The general rules for claiming a child as a dependent are explained, later, under Dependents 

[TaxGuyBill]

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@Greta wrote:

But mother cannot claim daughter as a dependent. Her trust income and the 2K she earns bring her over the AGI limit. No?

---

You are right that the child would not be a "Qualifying Relative" if the child's Gross Income is too high.

However, because the child is disabled, there is no age limit to be a "Qualifying Child".  So that is why I originally asked, does the child pay for over 1/2 of his own support?  That will help determine if the child qualifies as a "Qualifying Child" (dependent) or not.