Armed Forces' Tax Guide

Exemptions

Exemptions reduce your income before you figure your tax. For 1999, you generally can deduct $2,750 for each exemption you claim for yourself, your spouse, and each person who qualifies as your dependent. If another taxpayer can claim an exemption for you or your spouse, you cannot claim the exemption on your tax return. If you can claim an exemption for a dependent, that dependent cannot claim a personal exemption on his or her tax return.

To claim an exemption for a dependent on your tax return, you must list a valid taxpayer identification number (either an SSN, ITIN, or adoption taxpayer identification number (ATIN)) for each dependent.

If you do not provide a number when the form asks for it or if you list an incorrect number, the IRS may deny the exemption and charge you for additional tax.

Dependents

You can claim an exemption for your dependent if all the following tests are met:

• Member of household or relationship test,
• Citizenship test,
• Joint return test,
• Gross income test, and
• Support test.

For specific information on these tests, get Publication 501.

For the member of household or relationship test, the person must be related to you in a specific way or be a member of your household for the entire year. See Publication 501 for the list of relatives who do not have to live with you for an entire year for you to meet this test.

For the joint return test, the person generally cannot file a joint return.

For the gross income test, the person must have gross income of less than $2,750. This test does not apply if the person is your child and is under age 19 or is a full-time student under age 24.

The citizenship test and the support test are of special interest to members of the Armed Forces.

Citizenship Test

To be considered your dependent, the person must be a U.S. citizen or resident, or a resident of Canada or Mexico.

Your child. Children are usually citizens or residents of the country of their parents.

Child born in a foreign country. If you were a U.S. citizen when your child was born, the child may be considered a U.S. citizen for tax purposes. This applies even if the other parent was a nonresident alien (see Alien Status, earlier) and the child was born in a foreign country.

Child living abroad. You can claim your child's exemption if the child is a U.S. citizen and meets the other tests. It does not matter that the child lives abroad with the nonresident alien parent.

Legal adoption. If you legally adopt a child who is not a U.S. citizen or resident, you can claim the child's exemption if the other tests are met. The child must have had your home as his or her main home and be a member of your household for the entire year.

Example. Sergeant John Smith is a U.S. citizen and has been in the U.S. Army for 16 years. He is stationed in Germany. He and his wife, a German citizen, have a 2-year-old son who was born in Germany and who has dual citizenship--U.S. and German. Sergeant Smith's stepdaughter, a German citizen whom Sergeant Smith has not adopted, also lives with them. Only his son can be considered a U.S. citizen for whom a dependency exemption can be claimed. His stepdaughter does not qualify as a U.S. citizen or resident.

Support Test

To be considered your dependent, the person must receive more than half his or her support from you during the year. To figure if you provided more than half the support of a person, you must first determine the total support provided for that person.

Total support includes amounts spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities.

Generally, the amount of an item of support is the cost to provide it. Expenses that are not directly related to any one member of a household, such as the cost of food for the household, must be divided among members of the household. If the item is property or lodging, the amount of the item is the rent paid or its fair rental value.

Divorced or separated parents. Different rules apply to the support test for children of divorced or separated parents. These rules are discussed in Publication 501.

Dependency allotments. You can authorize an allotment from your pay for the support of your dependents. The amount is considered as provided by you in figuring whether you provide more than half the dependent's support.

If an allotment is used to support persons other than those you name, you can claim their exemptions if they otherwise qualify as your dependent.

Example. Army Sergeant Jeff Banks authorizes an allotment for his widowed mother. She uses the money to support herself and Jeff's 10-year-old sister. If that amount provides more than half their support, Jeff can claim an exemption for each of them, if they otherwise qualify, even though he only authorized the allotment for his mother.

Dependent in the Armed Forces. Generally, an exemption cannot be claimed for a person who is in the Armed Forces or is at one of the Armed Forces academies for the entire year because the support test will not have been met. However, if your dependent receives only partial support from the Armed Forces, you can still claim the exemption if you provided more than half his or her support and the other tests are met.

Example. Leslie James is 18 and single. She graduated from high school in June 1999 and entered the U.S. Air Force in September 1999. Leslie provided $4,400 (her wages of $3,400 and $1,000 for other items provided by the Air Force) for her support that year. Her parents provided $4,100. Her parents cannot claim a dependency exemption for her for 1999 because they did not provide more than half her support.

Information courtesy of United States Internal Revenue Service.

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