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File taxes online 1040ez Publication 596 - Main Content Table of Contents Chapter 1—Rules for EveryoneRule 1—Adjusted Gross Income (AGI) Limits Rule 2—You Must Have a Valid Social Security Number (SSN) Rule 3—Your Filing Status Cannot Be Married Filing Separately Rule 4—You Must Be a U. File taxes online 1040ez S. File taxes online 1040ez Citizen or Resident Alien All Year Rule 5—You Cannot File Form 2555 or Form 2555-EZ Rule 6—Your Investment Income Must Be $3,300 or Less Rule 7—You Must Have Earned Income Chapter 2—Rules If You Have a Qualifying ChildRule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer Chapter 3—Rules If You Do Not Have a Qualifying ChildRule 11—You Must Be at Least Age 25 but Under Age 65 Rule 12—You Cannot Be the Dependent of Another Person Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer Rule 14—You Must Have Lived in the United States More Than Half of the Year Chapter 4—Figuring and Claiming the EICRule 15—Earned Income Limits IRS Will Figure the EIC for You How To Figure the EIC Yourself Schedule EIC Chapter 5—Disallowance of the EICForm 8862 Are You Prohibited From Claiming the EIC for a Period of Years? Chapter 6—Detailed ExamplesExample 1—Sharon Rose Example 2—Cynthia and Jerry Grey Chapter 1—Rules for Everyone This chapter discusses Rules 1 through 7. File taxes online 1040ez You must meet all seven rules to qualify for the earned income credit. File taxes online 1040ez If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the publication. File taxes online 1040ez If you meet all seven rules in this chapter, then read either chapter 2 or chapter 3 (whichever applies) for more rules you must meet. File taxes online 1040ez Rule 1—Adjusted Gross Income (AGI) Limits Your adjusted gross income (AGI) must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. File taxes online 1040ez Adjusted gross income (AGI). File taxes online 1040ez   AGI is the amount on line 4 of Form 1040EZ, line 22 of Form 1040A, or line 38 of Form 1040. File taxes online 1040ez   If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. File taxes online 1040ez You do not need to read the rest of this publication. File taxes online 1040ez Example—AGI is more than limit. File taxes online 1040ez Your AGI is $38,550, you are single, and you have one qualifying child. File taxes online 1040ez You cannot claim the EIC because your AGI is not less than $37,870. File taxes online 1040ez However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. File taxes online 1040ez Community property. File taxes online 1040ez   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. File taxes online 1040ez This is different from the community property rules that apply under Rule 7. File taxes online 1040ez Rule 2—You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). File taxes online 1040ez Any qualifying child listed on Schedule EIC also must have a valid SSN. File taxes online 1040ez (See Rule 8 if you have a qualifying child. File taxes online 1040ez ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. File taxes online 1040ez An example of a federally funded benefit is Medicaid. File taxes online 1040ez If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. File taxes online 1040ez S. File taxes online 1040ez citizen or permanent resident, ask the SSA for a new social security card without the legend. File taxes online 1040ez If you get the new card after you have already filed your return, you can file an amended return on Form 1040X, Amended U. File taxes online 1040ez S. File taxes online 1040ez Individual Income Tax Return, to claim the EIC. File taxes online 1040ez U. File taxes online 1040ez S. File taxes online 1040ez citizen. File taxes online 1040ez   If you were a U. File taxes online 1040ez S. File taxes online 1040ez citizen when you received your SSN, you have a valid SSN. File taxes online 1040ez Valid for work only with INS authorization or DHS authorization. File taxes online 1040ez   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. File taxes online 1040ez SSN missing or incorrect. File taxes online 1040ez   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. File taxes online 1040ez Other taxpayer identification number. File taxes online 1040ez   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). File taxes online 1040ez ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. File taxes online 1040ez No SSN. File taxes online 1040ez   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). File taxes online 1040ez You cannot claim the EIC. File taxes online 1040ez Getting an SSN. File taxes online 1040ez   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5 with the SSA. File taxes online 1040ez You can get Form SS-5 online at www. File taxes online 1040ez socialsecurity. File taxes online 1040ez gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. File taxes online 1040ez Filing deadline approaching and still no SSN. File taxes online 1040ez   If the filing deadline is approaching and you still do not have an SSN, you have two choices. File taxes online 1040ez Request an automatic 6-month extension of time to file your return. File taxes online 1040ez You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. File taxes online 1040ez S. File taxes online 1040ez Individual Income Tax Return. File taxes online 1040ez For more information, see the instructions for Form 4868. File taxes online 1040ez File the return on time without claiming the EIC. File taxes online 1040ez After receiving the SSN, file an amended return, Form 1040X, claiming the EIC. File taxes online 1040ez Attach a filled-in Schedule EIC, Earned Income Credit, if you have a qualifying child. File taxes online 1040ez Rule 3—Your Filing Status Cannot Be “Married Filing Separately” If you are married, you usually must file a joint return to claim the EIC. File taxes online 1040ez Your filing status cannot be “Married filing separately. File taxes online 1040ez ” Spouse did not live with you. File taxes online 1040ez   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. File taxes online 1040ez In that case, you may be able to claim the EIC. File taxes online 1040ez For detailed information about filing as head of household, see Publication 501, Exemptions, Standard Deduction, and Filing Information. File taxes online 1040ez Rule 4—You Must Be a U. File taxes online 1040ez S. File taxes online 1040ez Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. File taxes online 1040ez You can use that filing status only if one spouse is a U. File taxes online 1040ez S. File taxes online 1040ez citizen or resident alien and you choose to treat the nonresident spouse as a U. File taxes online 1040ez S. File taxes online 1040ez resident. File taxes online 1040ez If you make this choice, you and your spouse are taxed on your worldwide income. File taxes online 1040ez If you need more information on making this choice, get Publication 519, U. File taxes online 1040ez S. File taxes online 1040ez Tax Guide for Aliens. File taxes online 1040ez If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). File taxes online 1040ez Rule 5—You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. File taxes online 1040ez You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. File taxes online 1040ez U. File taxes online 1040ez S. File taxes online 1040ez possessions are not foreign countries. File taxes online 1040ez See Publication 54, Tax Guide for U. File taxes online 1040ez S. File taxes online 1040ez Citizens and Resident Aliens Abroad, for more detailed information. File taxes online 1040ez Rule 6—Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. File taxes online 1040ez If your investment income is more than $3,300, you cannot claim the credit. File taxes online 1040ez Form 1040EZ. File taxes online 1040ez   If you file Form 1040EZ, your investment income is the total of the amount on line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. File taxes online 1040ez Form 1040A. File taxes online 1040ez   If you file Form 1040A, your investment income is the total of the amounts on lines 8a (taxable interest), 8b (tax-exempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) on that form. File taxes online 1040ez Form 1040. File taxes online 1040ez   If you file Form 1040, use Worksheet 1 in this chapter to figure your investment income. File taxes online 1040ez    Worksheet 1. File taxes online 1040ez Investment Income If You Are Filing Form 1040 Use this worksheet to figure investment income for the earned income credit when you file Form 1040. File taxes online 1040ez Interest and Dividends         1. File taxes online 1040ez Enter any amount from Form 1040, line 8a 1. File taxes online 1040ez   2. File taxes online 1040ez Enter any amount from Form 1040, line 8b, plus any amount on Form 8814, line 1b 2. File taxes online 1040ez   3. File taxes online 1040ez Enter any amount from Form 1040, line 9a 3. File taxes online 1040ez   4. File taxes online 1040ez Enter the amount from Form 1040, line 21, that is from Form 8814 if you are filing that form to report your child's interest and dividend income on your return. File taxes online 1040ez (If your child received an Alaska Permanent Fund dividend, use Worksheet 2 in this chapter to figure the amount to enter on this line. File taxes online 1040ez ) 4. File taxes online 1040ez   Capital Gain Net Income         5. File taxes online 1040ez Enter the amount from Form 1040, line 13. File taxes online 1040ez If the amount on that line is a loss, enter -0- 5. File taxes online 1040ez       6. File taxes online 1040ez Enter any gain from Form 4797, Sales of Business Property, line 7. File taxes online 1040ez If the amount on that line is a loss, enter -0-. File taxes online 1040ez (But, if you completed lines 8 and 9 of Form 4797, enter the amount from line 9 instead. File taxes online 1040ez ) 6. File taxes online 1040ez       7. File taxes online 1040ez Substract line 6 of this worksheet from line 5 of this worksheet. File taxes online 1040ez (If the result is less than zero, enter -0-. File taxes online 1040ez ) 7. File taxes online 1040ez   Royalties and Rental Income From Personal Property         8. File taxes online 1040ez Enter any royalty income from Schedule E, line 23b, plus any income from the rental of personal property shown on Form 1040, line 21 8. File taxes online 1040ez       9. File taxes online 1040ez Enter any expenses from Schedule E, line 20, related to royalty income, plus any expenses from the rental of personal property deducted on Form 1040, line 36 9. File taxes online 1040ez       10. File taxes online 1040ez Subtract the amount on line 9 of this worksheet from the amount on line 8. File taxes online 1040ez (If the result is less than zero, enter -0-. File taxes online 1040ez ) 10. File taxes online 1040ez   Passive Activities         11. File taxes online 1040ez Enter the total of any net income from passive activities (such as income included on Schedule E, line 26, 29a (col. File taxes online 1040ez (g)), 34a (col. File taxes online 1040ez (d)), or 40). File taxes online 1040ez (See instructions below for lines 11 and 12. File taxes online 1040ez ) 11. File taxes online 1040ez       12. File taxes online 1040ez Enter the total of any losses from passive activities (such as losses included on Schedule E, line 26, 29b (col. File taxes online 1040ez (f)), 34b (col. File taxes online 1040ez (c)), or 40). File taxes online 1040ez (See instructions below for lines 11 and 12. File taxes online 1040ez ) 12. File taxes online 1040ez       13. File taxes online 1040ez Combine the amounts on lines 11 and 12 of this worksheet. File taxes online 1040ez (If the result is less than zero, enter -0-. File taxes online 1040ez ) 13. File taxes online 1040ez   14. File taxes online 1040ez Add the amounts on lines 1, 2, 3, 4, 7, 10, and 13. File taxes online 1040ez Enter the total. File taxes online 1040ez This is your investment income 14. File taxes online 1040ez   15. File taxes online 1040ez Is the amount on line 14 more than $3,300? ❑ Yes. File taxes online 1040ez You cannot take the credit. File taxes online 1040ez  ❑ No. File taxes online 1040ez Go to Step 3 of the Form 1040 instructions for lines 64a and 64b to find out if you can take the credit (unless you are using this publication to find out if you can take the credit; in that case, go to Rule 7, next). File taxes online 1040ez       Instructions for lines 11 and 12. File taxes online 1040ez In figuring the amount to enter on lines 11 and 12, do not take into account any royalty income (or loss) included on line 26 of Schedule E or any amount included in your earned income. File taxes online 1040ez To find out if the income on line 26 or line 40 of Schedule E is from a passive activity, see the Schedule E instructions. File taxes online 1040ez If any of the rental real estate income (or loss) included on Schedule E, line 26, is not from a passive activity, print “NPA” and the amount of that income (or loss) on the dotted line next to line 26. File taxes online 1040ez Worksheet 2. File taxes online 1040ez Worksheet for Line 4 of Worksheet 1 Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund dividend. File taxes online 1040ez Note. File taxes online 1040ez Fill out a separate Worksheet 2 for each Form 8814. File taxes online 1040ez     1. File taxes online 1040ez Enter the amount from Form 8814, line 2a 1. File taxes online 1040ez   2. File taxes online 1040ez Enter the amount from Form 8814, line 2b 2. File taxes online 1040ez   3. File taxes online 1040ez Subtract line 2 from line 1 3. File taxes online 1040ez   4. File taxes online 1040ez Enter the amount from Form 8814, line 1a 4. File taxes online 1040ez   5. File taxes online 1040ez Add lines 3 and 4 5. File taxes online 1040ez   6. File taxes online 1040ez Enter the amount of the child's Alaska Permanent Fund dividend 6. File taxes online 1040ez   7. File taxes online 1040ez Divide line 6 by line 5. File taxes online 1040ez Enter the result as a decimal (rounded to at least three places) 7. File taxes online 1040ez   8. File taxes online 1040ez Enter the amount from Form 8814, line 12 8. File taxes online 1040ez   9. File taxes online 1040ez Multiply line 7 by line 8 9. File taxes online 1040ez   10. File taxes online 1040ez Subtract line 9 from line 8. File taxes online 1040ez Enter the result on line 4 of Worksheet 1 10. File taxes online 1040ez     (If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2. File taxes online 1040ez )     Example—completing Worksheet 2. File taxes online 1040ez Your 10-year-old child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. File taxes online 1040ez You choose to report this income on your return. File taxes online 1040ez You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. File taxes online 1040ez After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. File taxes online 1040ez On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0. File taxes online 1040ez 500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. File taxes online 1040ez You then enter $200 on line 4 of Worksheet 1. File taxes online 1040ez Rule 7—You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. File taxes online 1040ez If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. File taxes online 1040ez If you are an employee, earned income includes all the taxable income you get from your employer. File taxes online 1040ez Rule 15 has information that will help you figure the amount of your earned income. File taxes online 1040ez If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the Form 1040 instructions. File taxes online 1040ez Earned Income Earned income includes all of the following types of income. File taxes online 1040ez Wages, salaries, tips, and other taxable employee pay. File taxes online 1040ez Employee pay is earned income only if it is taxable. File taxes online 1040ez Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. File taxes online 1040ez But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter. File taxes online 1040ez Net earnings from self-employment. File taxes online 1040ez Gross income received as a statutory employee. File taxes online 1040ez Wages, salaries, and tips. File taxes online 1040ez    Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. File taxes online 1040ez You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). File taxes online 1040ez Nontaxable combat pay election. File taxes online 1040ez   You can elect to include your nontaxable combat pay in earned income for the earned income credit. File taxes online 1040ez The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. File taxes online 1040ez Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. File taxes online 1040ez For details, see Nontaxable combat pay in chapter 4. File taxes online 1040ez Net earnings from self-employment. File taxes online 1040ez   You may have net earnings from self-employment if: You own your own business, or You are a minister or member of a religious order. File taxes online 1040ez Minister's housing. File taxes online 1040ez   The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax but is included in net earnings from self-employment. File taxes online 1040ez For that reason, it is included in earned income for the EIC (except in the cases described in Approved Form 4361 or Form 4029 , below). File taxes online 1040ez Statutory employee. File taxes online 1040ez   You are a statutory employee if you receive a Form W-2 on which the “Statutory employee” box (box 13) is checked. File taxes online 1040ez You report your income and expenses as a statutory employee on Schedule C or C-EZ (Form 1040). File taxes online 1040ez Strike benefits. File taxes online 1040ez   Strike benefits paid by a union to its members are earned income. File taxes online 1040ez Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. File taxes online 1040ez Each approved form exempts certain income from social security taxes. File taxes online 1040ez Each form is discussed here in terms of what is or is not earned income for the EIC. File taxes online 1040ez Form 4361. File taxes online 1040ez   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. File taxes online 1040ez This includes wages, salaries, tips, and other taxable employee compensation. File taxes online 1040ez A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. File taxes online 1040ez Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. File taxes online 1040ez Examples include fees for performing marriages and honoraria for delivering speeches. File taxes online 1040ez Form 4029. File taxes online 1040ez   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. File taxes online 1040ez However, amounts you received as a self-employed individual do not count as earned income. File taxes online 1040ez Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. File taxes online 1040ez Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. File taxes online 1040ez Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. File taxes online 1040ez You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. File taxes online 1040ez Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. File taxes online 1040ez Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b. File taxes online 1040ez Disability insurance payments. File taxes online 1040ez   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. File taxes online 1040ez It does not matter whether you have reached minimum retirement age. File taxes online 1040ez If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. File taxes online 1040ez ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. File taxes online 1040ez Do not include any of these items in your earned income. File taxes online 1040ez Earnings while an inmate. File taxes online 1040ez   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. File taxes online 1040ez This includes amounts for work performed while in a work release program or while in a halfway house. File taxes online 1040ez Workfare payments. File taxes online 1040ez   Nontaxable workfare payments are not earned income for the EIC. File taxes online 1040ez These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. File taxes online 1040ez Community property. File taxes online 1040ez   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. File taxes online 1040ez That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. File taxes online 1040ez Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. File taxes online 1040ez Nevada, Washington, and California domestic partners. File taxes online 1040ez   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. File taxes online 1040ez Your earned income for the EIC does not include any amount earned by your partner. File taxes online 1040ez Your earned income includes the entire amount you earned. File taxes online 1040ez For details, see Publication 555. File taxes online 1040ez Conservation Reserve Program (CRP) payments. File taxes online 1040ez   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. File taxes online 1040ez Nontaxable military pay. File taxes online 1040ez   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. File taxes online 1040ez Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). File taxes online 1040ez See Publication 3, Armed Forces' Tax Guide, for more information. File taxes online 1040ez    Combat pay. File taxes online 1040ez You can elect to include your nontaxable combat pay in earned income for the EIC. File taxes online 1040ez See Nontaxable combat pay in chapter 4. File taxes online 1040ez Chapter 2—Rules If You Have a Qualifying Child If you have met all the rules in chapter 1, use this chapter to see if you have a qualifying child. File taxes online 1040ez This chapter discusses Rules 8 through 10. File taxes online 1040ez You must meet all three of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit with a qualifying child. File taxes online 1040ez You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. File taxes online 1040ez (You cannot file Form 1040EZ. File taxes online 1040ez ) You also must complete Schedule EIC and attach it to your return. File taxes online 1040ez If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. File taxes online 1040ez No qualifying child. File taxes online 1040ez   If you do not meet Rule 8, you do not have a qualifying child. File taxes online 1040ez Read chapter 3 to find out if you can get the earned income credit without a qualifying child. File taxes online 1040ez Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. File taxes online 1040ez The fours tests are: Relationship, Age, Residency, and Joint return. File taxes online 1040ez The four tests are illustrated in Figure 1. File taxes online 1040ez The paragraphs that follow contain more information about each test. File taxes online 1040ez Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). File taxes online 1040ez The following definitions clarify the relationship test. File taxes online 1040ez Adopted child. File taxes online 1040ez   An adopted child is always treated as your own child. File taxes online 1040ez The term “adopted child” includes a child who was lawfully placed with you for legal adoption. File taxes online 1040ez Foster child. File taxes online 1040ez   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. File taxes online 1040ez (An authorized placement agency includes a state or local government agency. File taxes online 1040ez It also includes a tax-exempt organization licensed by a state. File taxes online 1040ez In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. File taxes online 1040ez ) Example. File taxes online 1040ez Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. File taxes online 1040ez Debbie is your foster child. File taxes online 1040ez Figure 1. File taxes online 1040ez Tests for Qualifying Child Please click here for the text description of the image. File taxes online 1040ez Conditions for Qualifying Child Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly, or Permanently and totally disabled at any time during 2013, regardless of age. File taxes online 1040ez The following examples and definitions clarify the age test. File taxes online 1040ez Example 1—child not under age 19. File taxes online 1040ez Your son turned 19 on December 10. File taxes online 1040ez Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. File taxes online 1040ez Example 2—child not younger than you or your spouse. File taxes online 1040ez Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. File taxes online 1040ez He is not disabled. File taxes online 1040ez Both you and your spouse are 21 years old, and you file a joint return. File taxes online 1040ez Your brother is not your qualifying child because he is not younger than you or your spouse. File taxes online 1040ez Example 3—child younger than your spouse but not younger than you. File taxes online 1040ez The facts are the same as in Example 2 except that your spouse is 25 years old. File taxes online 1040ez Because your brother is younger than your spouse, he is your qualifying child, even though he is not younger than you. File taxes online 1040ez Student defined. File taxes online 1040ez   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. File taxes online 1040ez   The 5 calendar months need not be consecutive. File taxes online 1040ez   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. File taxes online 1040ez School defined. File taxes online 1040ez   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. File taxes online 1040ez However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. File taxes online 1040ez Vocational high school students. File taxes online 1040ez   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. File taxes online 1040ez Permanently and totally disabled. File taxes online 1040ez   Your child is permanently and totally disabled if both of the following apply. File taxes online 1040ez He or she cannot engage in any substantial gainful activity because of a physical or mental condition. File taxes online 1040ez A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. File taxes online 1040ez Residency Test Your child must have lived with you in the United States for more than half of 2013. File taxes online 1040ez The following definitions clarify the residency test. File taxes online 1040ez United States. File taxes online 1040ez   This means the 50 states and the District of Columbia. File taxes online 1040ez It does not include Puerto Rico or U. File taxes online 1040ez S. File taxes online 1040ez possessions such as Guam. File taxes online 1040ez Homeless shelter. File taxes online 1040ez   Your home can be any location where you regularly live. File taxes online 1040ez You do not need a traditional home. File taxes online 1040ez For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. File taxes online 1040ez Military personnel stationed outside the United States. File taxes online 1040ez   U. File taxes online 1040ez S. File taxes online 1040ez military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. File taxes online 1040ez Extended active duty. File taxes online 1040ez   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. File taxes online 1040ez Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. File taxes online 1040ez Birth or death of child. File taxes online 1040ez    child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. File taxes online 1040ez Temporary absences. File taxes online 1040ez   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. File taxes online 1040ez Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. File taxes online 1040ez Kidnapped child. File taxes online 1040ez   A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. File taxes online 1040ez The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. File taxes online 1040ez This treatment applies for all years until the child is returned. File taxes online 1040ez However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. File taxes online 1040ez   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. File taxes online 1040ez Joint Return Test To meet this test, the child cannot file a joint return for the year. File taxes online 1040ez Exception. File taxes online 1040ez   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. File taxes online 1040ez Example 1—child files joint return. File taxes online 1040ez You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. File taxes online 1040ez He earned $25,000 for the year. File taxes online 1040ez The couple files a joint return. File taxes online 1040ez Because your daughter and her husband file a joint return, she is not your qualifying child. File taxes online 1040ez Example 2—child files joint return to get refund of tax withheld. File taxes online 1040ez Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. File taxes online 1040ez They do not have a child. File taxes online 1040ez Neither is required to file a tax return. File taxes online 1040ez Taxes were taken out of their pay, so they file a joint return only to get a refund of the withheld taxes. File taxes online 1040ez The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. File taxes online 1040ez Example 3—child files joint return to claim American opportunity credit. File taxes online 1040ez The facts are the same as in Example 2 except no taxes were taken out of your son's pay. File taxes online 1040ez He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. File taxes online 1040ez Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to claim a refund of income tax withheld or estimated tax paid. File taxes online 1040ez The exception to the joint return test does not apply, so your son is not your qualifying child. File taxes online 1040ez Married child. File taxes online 1040ez   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) described later. File taxes online 1040ez    Social security number. File taxes online 1040ez Your qualifying child must have a valid social security number (SSN), unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. File taxes online 1040ez You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. File taxes online 1040ez   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. File taxes online 1040ez For more information about SSNs, see Rule 2. File taxes online 1040ez Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. File taxes online 1040ez However, only one of these persons can actually treat the child as a qualifying child. File taxes online 1040ez Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). File taxes online 1040ez The exemption for the child. File taxes online 1040ez The child tax credit. File taxes online 1040ez Head of household filing status. File taxes online 1040ez The credit for child and dependent care expenses. File taxes online 1040ez The exclusion for dependent care benefits. File taxes online 1040ez The EIC. File taxes online 1040ez The other person cannot take any of these benefits based on this qualifying child. File taxes online 1040ez In other words, you and the other person cannot agree to divide these tax benefits between you. File taxes online 1040ez The other person cannot take any of these tax benefits unless he or she has a different qualifying child. File taxes online 1040ez The tiebreaker rules, which follow, explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. File taxes online 1040ez However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. File taxes online 1040ez Tiebreaker rules. File taxes online 1040ez   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. File taxes online 1040ez If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. File taxes online 1040ez If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. File taxes online 1040ez If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. File taxes online 1040ez If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. File taxes online 1040ez If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. File taxes online 1040ez If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. File taxes online 1040ez If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. File taxes online 1040ez See Example 8. File taxes online 1040ez   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. File taxes online 1040ez See Examples 1 through 13. File taxes online 1040ez   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in chapter 3 for people who do not have a qualifying child. File taxes online 1040ez If the other person cannot claim the EIC. File taxes online 1040ez   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. File taxes online 1040ez See Examples 6 and 7. File taxes online 1040ez But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier in this chapter. File taxes online 1040ez Examples. File taxes online 1040ez    The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. File taxes online 1040ez Example 1—child lived with parent and grandparent. File taxes online 1040ez You and your 2-year-old son Jimmy lived with your mother all year. File taxes online 1040ez You are 25 years old, unmarried, and your AGI is $9,000. File taxes online 1040ez Your only income was $9,000 from a part-time job. File taxes online 1040ez Your mother's only income was $20,000 from her job, and her AGI is $20,000. File taxes online 1040ez Jimmy's father did not live with you or Jimmy. File taxes online 1040ez The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. File taxes online 1040ez Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. File taxes online 1040ez However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier in this chapter for which that person qualifies). File taxes online 1040ez He is not a qualifying child of anyone else, including his father. File taxes online 1040ez If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). File taxes online 1040ez Example 2—parent has higher AGI than grandparent. File taxes online 1040ez The facts are the same as in Example 1 except your AGI is $25,000. File taxes online 1040ez Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. File taxes online 1040ez Only you can claim him. File taxes online 1040ez Example 3—two persons claim same child. File taxes online 1040ez The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. File taxes online 1040ez In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. File taxes online 1040ez The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. File taxes online 1040ez Example 4—qualifying children split between two persons. File taxes online 1040ez The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. File taxes online 1040ez Only one of you can claim each child. File taxes online 1040ez However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. File taxes online 1040ez For example, if you claim one child, your mother can claim the other two. File taxes online 1040ez Example 5—taxpayer who is a qualifying child. File taxes online 1040ez The facts are the same as in Example 1 except that you are only 18 years old. File taxes online 1040ez This means you are a qualifying child of your mother. File taxes online 1040ez Because of Rule 10, discussed next, you cannot claim the EIC and cannot claim your son as a qualifying child. File taxes online 1040ez Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. File taxes online 1040ez If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. File taxes online 1040ez Example 6—grandparent with too much earned income to claim EIC. File taxes online 1040ez The facts are the same as in Example 1 except that your mother earned $50,000 from her job. File taxes online 1040ez Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. File taxes online 1040ez Example 7—parent with too much earned income to claim EIC. File taxes online 1040ez The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. File taxes online 1040ez Your earned income is too high for you to claim the EIC. File taxes online 1040ez But your mother cannot claim the EIC either, because her AGI is not higher than yours. File taxes online 1040ez Example 8—child lived with both parents and grandparent. File taxes online 1040ez The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have AGI of $30,000 on a joint return. File taxes online 1040ez If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. File taxes online 1040ez Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. File taxes online 1040ez In other words, each parent's AGI can be treated as $15,000. File taxes online 1040ez Example 9—separated parents. File taxes online 1040ez You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. File taxes online 1040ez In August and September, Joey lived with you. File taxes online 1040ez For the rest of the year, Joey lived with your husband, who is Joey's father. File taxes online 1040ez Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. File taxes online 1040ez At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the Special rule for divorced or separated parents (or parents who live apart) does not apply. File taxes online 1040ez You and your husband will file separate returns. File taxes online 1040ez Your husband agrees to let you treat Joey as a qualifying child. File taxes online 1040ez This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. File taxes online 1040ez However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. File taxes online 1040ez See Rule 3. File taxes online 1040ez Example 10—separated parents claim same child. File taxes online 1040ez The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. File taxes online 1040ez In this case, only your husband will be allowed to treat Joey as a qualifying child. File taxes online 1040ez This is because, during 2013, the boy lived with him longer than with you. File taxes online 1040ez You cannot claim the EIC (either with or without a qualifying child). File taxes online 1040ez However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. File taxes online 1040ez See Rule 3. File taxes online 1040ez Example 11—unmarried parents. File taxes online 1040ez You, your 5-year-old son, and your son's father lived together all year. File taxes online 1040ez You and your son's father are not married. File taxes online 1040ez Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. File taxes online 1040ez Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. File taxes online 1040ez Neither of you had any other income. File taxes online 1040ez Your son's father agrees to let you treat the child as a qualifying child. File taxes online 1040ez This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. File taxes online 1040ez Example 12—unmarried parents claim same child. File taxes online 1040ez The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. File taxes online 1040ez In this case, only your son's father will be allowed to treat your son as a qualifying child. File taxes online 1040ez This is because his AGI, $14,000, is more than your AGI, $12,000. File taxes online 1040ez You cannot claim the EIC (either with or without a qualifying child). File taxes online 1040ez Example 13—child did not live with a parent. File taxes online 1040ez You and your 7-year-old niece, your sister's child, lived with your mother all year. File taxes online 1040ez You are 25 years old, and your AGI is $9,300. File taxes online 1040ez Your only income was from a part-time job. File taxes online 1040ez Your mother's AGI is $15,000. File taxes online 1040ez Her only income was from her job. File taxes online 1040ez Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. File taxes online 1040ez Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. File taxes online 1040ez However, only your mother can treat her as a qualifying child. File taxes online 1040ez This is because your mother's AGI, $15,000, is more than your AGI, $9,300. File taxes online 1040ez Special rule for divorced or separated parents (or parents who live apart). File taxes online 1040ez   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. File taxes online 1040ez The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all time during the last 6 months of 2013, whether or not they are or were married. File taxes online 1040ez The child received over half of his or her support for the year from the parents. File taxes online 1040ez The child is in the custody of one or both parents for more than half of 2013. File taxes online 1040ez Either of the following statements is true. File taxes online 1040ez The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. File taxes online 1040ez If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. File taxes online 1040ez A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. File taxes online 1040ez For details, see Publication 501. File taxes online 1040ez Also see Applying Rule 9 to divorced or separated parents (or parents who live apart), next. File taxes online 1040ez Applying Rule 9 to divorced or separated parents (or parents who live apart). File taxes online 1040ez   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. File taxes online 1040ez However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. File taxes online 1040ez If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. File taxes online 1040ez Example 1. File taxes online 1040ez You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. File taxes online 1040ez Your AGI is $10,000. File taxes online 1040ez Your mother’s AGI is $25,000. File taxes online 1040ez Your son's father did not live with you or your son. File taxes online 1040ez Under the Special rule for divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. File taxes online 1040ez However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. File taxes online 1040ez You and your mother did not have any child care expenses or dependent care benefits. File taxes online 1040ez If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. File taxes online 1040ez Example 2. File taxes online 1040ez The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. File taxes online 1040ez Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. File taxes online 1040ez Example 3. File taxes online 1040ez The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. File taxes online 1040ez Your mother also claims him as a qualifying child for head of household filing status. File taxes online 1040ez You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. File taxes online 1040ez The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. File taxes online 1040ez Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. File taxes online 1040ez ) if all of the following statements are true. File taxes online 1040ez You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. File taxes online 1040ez Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. File taxes online 1040ez You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. File taxes online 1040ez You lived with that person in the United States for more than half of the year. File taxes online 1040ez You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). File taxes online 1040ez For more details about the tests to be a qualifying child, see Rule 8. File taxes online 1040ez If you are a qualifying child of another taxpayer, you cannot claim the EIC. File taxes online 1040ez This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. File taxes online 1040ez Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). File taxes online 1040ez Example. File taxes online 1040ez You and your daughter lived with your mother all year. File taxes online 1040ez You are 22 years old, unmarried, and attended a trade school full time. File taxes online 1040ez You had a part-time job and earned $5,700. File taxes online 1040ez You had no other income. File taxes online 1040ez Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. File taxes online 1040ez She can claim the EIC if she meets all the other requirements. File taxes online 1040ez Because you are your mother's qualifying child, you cannot claim the EIC. File taxes online 1040ez This is so even if your mother cannot or does not claim the EIC. File taxes online 1040ez Child of person not required to file a return. File taxes online 1040ez   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you met the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. File taxes online 1040ez Example 1—return not required. File taxes online 1040ez The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. File taxes online 1040ez As a result, you are not your mother's qualifying child. File taxes online 1040ez You can claim the EIC if you meet all the other requirements to do so. File taxes online 1040ez Example 2—return filed to get refund of tax withheld. File taxes online 1040ez The facts are the same as in Example 1 except your mother had wages of $1,500 and had income tax withheld from her wages. File taxes online 1040ez She files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. File taxes online 1040ez As a result, you are not your mother's qualifying child. File taxes online 1040ez You can claim the EIC if you meet all the other requirements to do so. File taxes online 1040ez Example 3—return filed to get EIC. File taxes online 1040ez The facts are the same as in Example 2 except your mother claimed the EIC on her return. File taxes online 1040ez Since she filed the return to get the EIC, she is not filing it only to get a refund of income tax withheld. File taxes online 1040ez As a result, you are your mother's qualifying child. File taxes online 1040ez You cannot claim the EIC. File taxes online 1040ez Chapter 3—Rules If You Do Not Have a Qualifying Child Use this chapter if you do not have a qualifying child and have met all the rules in chapter 1. File taxes online 1040ez This chapter discusses Rules 11 through 14. File taxes online 1040ez You must meet all four of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit without a qualifying child. File taxes online 1040ez You can file Form 1040, Form 1040A, or Form 1040EZ to claim the EIC without a qualifying child. File taxes online 1040ez If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. File taxes online 1040ez If you have a qualifying child. File taxes online 1040ez   If you meet Rule 8, you have a qualifying child. File taxes online 1040ez If you meet Rule 8 and do not claim the EIC with a qualifying child, you cannot claim the EIC without a qualifying child. File taxes online 1040ez Rule 11—You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. File taxes online 1040ez If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. File taxes online 1040ez It does not matter which spouse meets the age test, as long as one of the spouses does. File taxes online 1040ez You meet the age test if you were born after December 31, 1948, and before January 2, 1989. File taxes online 1040ez If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. File taxes online 1040ez If neither you nor your spouse meets the age test, you cannot claim the EIC. File taxes online 1040ez Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). File taxes online 1040ez Death of spouse. File taxes online 1040ez   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. File taxes online 1040ez Example 1. File taxes online 1040ez You are age 28 and unmarried. File taxes online 1040ez You meet the age test. File taxes online 1040ez Example 2—spouse meets age test. File taxes online 1040ez You are married and filing a joint return. File taxes online 1040ez You are age 23 and your spouse is age 27. File taxes online 1040ez You meet the age test because your spouse is at least age 25 but under age 65. File taxes online 1040ez Example 3—spouse dies in 2013. File taxes online 1040ez You are married and filing a joint return with your spouse who died in August 2013. File taxes online 1040ez You are age 67. File taxes online 1040ez Your spouse would have become age 65 in November 2013. File taxes online 1040ez Because your spouse was under age 65 when she died, you meet the age test. File taxes online 1040ez Rule 12—You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. File taxes online 1040ez If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. File taxes online 1040ez If you are not sure whether someone else can claim you as a dependent, get Publication 501 and read the rules for claiming a dependent. File taxes online 1040ez If someone else can claim you as a dependent on his or her return, but does not, you still cannot claim the credit. File taxes online 1040ez Example 1. File taxes online 1040ez In 2013, you were age 25, single, and living at home with your parents. File taxes online 1040ez You worked and were not a student. File taxes online 1040ez You earned $7,500. File taxes online 1040ez Your parents cannot claim you as a dependent. File taxes online 1040ez When you file your return, you claim an exemption for yourself by not checking the You box on line 5 of your Form 1040EZ and by entering $10,000 on that line. File taxes online 1040ez You meet this rule. File taxes online 1040ez You can claim the EIC if you meet all the other requirements. File taxes online 1040ez Example 2. File taxes online 1040ez The facts are the same as in Example 1, except that you earned $2,000. File taxes online 1040ez Your parents can claim you as a dependent but decide not to. File taxes online 1040ez You do not meet this rule. File taxes online 1040ez You cannot claim the credit because your parents could have claimed you as a dependent. File taxes online 1040ez Joint returns. File taxes online 1040ez   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. File taxes online 1040ez   However, another person may be able to claim you as a dependent if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. File taxes online 1040ez But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. File taxes online 1040ez Example 1—return filed to get refund of tax withheld. File taxes online 1040ez You are 26 years old. File taxes online 1040ez You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. File taxes online 1040ez Neither you nor your wife is required to file a tax return. File taxes online 1040ez You do not have a child. File taxes online 1040ez Taxes were taken out of your pay so you file a joint return only to get a refund of the withheld taxes. File taxes online 1040ez Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. File taxes online 1040ez They can claim exemptions for you and your wife if all the other tests to do so are met. File taxes online 1040ez Example 2—return filed to get EIC. File taxes online 1040ez The facts are the same as in Example 1except no taxes were taken out of your pay. File taxes online 1040ez Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. File taxes online 1040ez Because claiming the EIC is your reason for filing the return, you are not filing it only to claim a refund of income tax withheld or estimated tax paid. File taxes online 1040ez Your parents cannot claim an exemption for either you or your wife. File taxes online 1040ez Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. File taxes online 1040ez ) if all of the following statements are true. File taxes online 1040ez You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. File taxes online 1040ez Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. File taxes online 1040ez You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. File taxes online 1040ez You lived with that person in the United States for more than half of the year. File taxes online 1040ez You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). File taxes online 1040ez For more details about the tests to be a qualifying child, see Rule 8. File taxes online 1040ez If you are a qualifying child of another taxpayer, you cannot claim the EIC. File taxes online 1040ez This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. File taxes online 1040ez Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). File taxes online 1040ez Example. File taxes online 1040ez You lived with your mother all year. File taxes online 1040ez You are age 26, unmarried, and permanently and totally disabled. File taxes online 1040ez Your only income was from a community center where you went three days a week to answer telephones. File taxes online 1040ez You earned $5,000 for the year and provided more than half of your own support. File taxes online 1040ez Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. File taxes online 1040ez She can claim the EIC if she meets all the other requirements. File taxes online 1040ez Because you are a qualifying child of your mother, you cannot claim the EIC. File taxes online 1040ez This is so even if your mother cannot or does not claim the EIC. File taxes online 1040ez Joint returns. File taxes online 1040ez   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. File taxes online 1040ez   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. File taxes online 1040ez But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. File taxes online 1040ez Child of person not required to file a return. File taxes online 1040ez   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. File taxes online 1040ez Example 1—return not required. File taxes online 1040ez You lived all year with your father. File taxes online 1040ez You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. File taxes online 1040ez You have no other income, no children, and provided more than half of your own support. File taxes online 1040ez Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. File taxes online 1040ez As a result, you are not your father's qualifying child. File taxes online 1040ez You can claim the EIC if you meet all the other requirements to do so. File taxes online 1040ez Example 2—return filed to get refund of tax withheld. File taxes online 1040ez The facts are the same as in Example 1 except your father had wages of $1,500 and had income tax withheld from his wages. File taxes online 1040ez He files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. File taxes online 1040ez As a result, you are not your father's qualifying child. File taxes online 1040ez You can claim the EIC if you meet all the other requirements to do so. File taxes online 1040ez Example 3—return filed to get EIC. File taxes online 1040ez The facts are the same as in Example 2 except your father claimed the EIC on his return. File taxes online 1040ez Since he filed the return to get the EIC, he is not filing it only to get a refund of income tax withheld. File taxes online 1040ez As a result, you are your father's qualifying child. File taxes online 1040ez You cannot claim the EIC. File taxes online 1040ez Rule 14—You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. File taxes online 1040ez If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). File taxes online 1040ez United States. File taxes online 1040ez   This means the 50 states and the District of Columbia. File taxes online 1040ez It does not include Puerto Rico or U. File taxes online 1040ez S. File taxes online 1040ez possessions such as Guam. File taxes online 1040ez Homeless shelter. File taxes online 1040ez   Your home can be any location where you regularly live. File taxes online 1040ez You do not need a traditional home. File taxes online 1040ez If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. File taxes online 1040ez Military personnel stationed outside the United States. File taxes online 1040ez   U. File taxes online 1040ez S. File taxes online 1040ez military personnel stationed outside the United States on extended active duty (defined in chapter 2) are considered to live in the United States during that duty period for purposes of the EIC. File taxes online 1040ez Chapter 4—Figuring and Claiming the EIC You must meet one more rule to claim the EIC. File taxes online 1040ez You need to know the amount of your earned income to see if you meet the rule in this chapter. File taxes online 1040ez You also need to know that amount to figure your EIC. File taxes online 1040ez Rule 15—Earned Income Limits Your earned income must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. File taxes online 1040ez Earned Income Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. File taxes online 1040ez Employee pay is earned income only if it is taxable. File taxes online 1040ez Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. File taxes online 1040ez But there is an exception for nontaxable combat pay, which you can choose to include in earned income. File taxes online 1040ez Earned income is explained in detail in Rule 7 in chapter 1. File taxes online 1040ez Figuring earned income. File taxes online 1040ez   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. File taxes online 1040ez   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. File taxes online 1040ez   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). File taxes online 1040ez You will then reduce that amount by any amount included on that line and described in the following list. File taxes online 1040ez Scholarship or fellowship grants not reported on a Form W-2. File taxes online 1040ez A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. File taxes online 1040ez Inmate's income. File taxes online 1040ez Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. File taxes online 1040ez This includes amounts received for work performed while in a work release program or while in a halfway house. File taxes online 1040ez If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). File taxes online 1040ez Pension or annuity from deferred compensation plans. File taxes online 1040ez A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. File taxes online 1040ez If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). File taxes online 1040ez This amount may be reported in box 11 of your Form W-2. File taxes online 1040ez If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or an annuity. File taxes online 1040ez Clergy. File taxes online 1040ez   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also re
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Tax Law Changes Related to National Disaster Relief

FS-2009-8, January 2009

(Updated June 21, 2010 — For information regarding the filing of 2009 income tax returns, refer to the last section of this document, "Reporting Losses from a Federally Declared Disaster Occurring in 2010.")

The National Disaster Relief Act of 2008, Subtitle B or Title VII of the Emergency Economic Stabilization Act of 2008, signed into law on Oct. 3, 2008, as Public Law 110-343, provides tax relief for victims of federally declared disasters occurring after
Dec. 31, 2007, and before Jan. 1, 2010.

Prior to enactment of the National Disaster Relief Act, when a major disaster struck, Congress would draft legislation providing targeted tax benefits for taxpayers affected by the disaster that were specific to that particular disaster.

The National Disaster Relief Act, which provides a broad package of tax benefits that may be used by anyone who is affected by a federally declared disaster, effectively replaces the strategy of providing targeted benefits for disaster victims in the weeks or months following the incident. Certain provisions of the National Disaster Relief Act of 2008 do not apply to the Midwestern disaster areas –– disasters affecting the Midwest that were declared from May 20, 2008 through July 31, 2008 –– because the Heartland and Hurricane Ike Disaster Relief Act, part of the same legislation that resulted in the National Disaster Relief Act, provides other tax benefits. See Publication 4492-B for detailed information on the tax benefits that apply to the Midwestern disaster areas. 

The National Disaster Relief Act provides the following tax benefits: 

  • Allows all taxpayers, not just those who itemize, to claim the casualty loss deduction regardless of the taxpayer’s adjusted gross income level;
  • Increases the amount by which all individual taxpayers must reduce their personal casualty losses from each casualty from $100 to $500 for taxable years beginning after Dec. 31, 2008. The reduction amount returns to $100 for taxable years beginning after Dec. 31, 2009;   
  • Removes the requirement that the net casualty loss deduction be allowed only if the casualty loss exceeds 10 percent of the taxpayer’s adjusted gross income;
  • Provides a five-year net operating loss (NOL) carryback for qualified natural disaster losses.
  • Waives certain mortgage revenue bond requirements for affected taxpayers and allows the bond proceeds to be used for rebuilding.

For business taxpayers, the Act also:   

  • Allows an affected business taxpayer to deduct certain qualified disaster cleanup expenses;
  • Allows an affected business taxpayer to deduct 50 percent of the cost of qualifying property in addition to the regular depreciation allowance that is normally available; and
  • Increases the limits that an affected business taxpayer can expense for qualifying section 179 property.

Major portions of the National Disaster Relief Act are highlighted below.

See Publication 547, Casualties, Disasters, and Thefts, for information necessary in preparing 2008 tax returns. 

Section 706: Losses Attributable to Federally Declared Disasters

Section 706 of the National Disaster Relief Act provides relief to individual taxpayers whose personal-use property was damaged or destroyed by a casualty in a federally declared disaster area. 

Under prior law, individuals who suffered casualty losses as a result of a Presidentially-declared disaster –– the term was redefined as “federally declared disaster” in the legislation –– were required to reduce the loss from each casualty event by $100 and reduce the total of their casualty losses for the tax year by 10 percent of their adjusted gross income. In addition, these individuals were required to claim their casualty losses as an itemized deduction. 

The new law removes the 10 percent of adjusted gross income limitation for net disaster losses and allows individuals to claim the net disaster losses even if they do not itemize their deductions. 

To qualify, a loss must be attributable to a federally declared disaster and occur in an area determined by the President to warrant federal assistance. A federally declared disaster is any disaster subsequently determined by the President to warrant assistance by the federal government under the Stafford Act. The deduction is limited to the “net disaster loss” which consists of the excess of personal casualty losses attributable to a federally declared disaster over personal casualty gains. The new law is effective for disasters declared in taxable years beginning after Dec. 31, 2007, and occurring before Jan. 1, 2010. Information on disaster declarations and the areas they encompass may be found at the Federal Emergency Management Agency (FEMA) Web site.

The new law also changes the amount by which all individual taxpayers must reduce their personal casualty losses from each casualty from $100 to $500. This change is effective for taxable years beginning after Dec. 31, 2008. The reduction amount returns to $100 for taxable years beginning after Dec. 31, 2009.   

For more information on these tax law changes, see Publication 547, Casualties, Disasters, and Thefts.

Section 712 provides that these changes to the law do not apply to the casualty losses in the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008. See Publication 4492-B for more information on the Midwestern disaster areas.

Section 707: Expensing of Qualified Disaster Expenses

Section 707 of the National Disaster Relief Act allows taxpayers to elect to currently deduct qualified disaster expenses in the tax year paid or incurred. Qualified disaster expenses consist of expenditures paid or incurred in connection with a trade or business or with business-related property that otherwise must be capitalized and that are:

  • For the abatement or control of hazardous substances that were released on account of a federally declared disaster;
  • Debris removal or demolition of structures on real property damaged or destroyed by a federally declared disaster; or
  • For the repair of business-related property damaged by a federally declared disaster. 

As previously explained, a federally declared disaster is any disaster subsequently determined by the President to warrant assistance by the federal government under the Stafford Act. This provision is effective for amounts paid or incurred after Dec. 31, 2007, in connection with disasters declared after that date and federally declared disasters occurring before Jan. 1, 2010. 

Section 712 provides that these changes to the law do not apply to the casualty losses in the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008

Section 708: Net Operating Losses Attributable to Federally Declared Disasters

In general, a net operating loss is carried back two years and carried forward 20. Section 708 of the National Disaster Relief Act allows taxpayers to carry back a qualified disaster loss five years. A qualified disaster loss is the lesser of the taxpayer’s net operating loss for the taxable year or the sum of the following:

  • The taxpayer’s losses allowable under section 165 of the Internal Revenue Code for the taxable year attributable to a federally declared disaster occurring before Jan. 1, 2010, and occurring in a disaster area; and
  • The taxpayer’s deduction for the taxable year for qualified disaster expenses allowable under section 198A(a) of the Internal Revenue Code (or the amount that would have been allowable if the taxpayer deducted qualified disaster expenses). 

A qualified disaster loss is treated a net operating loss that is separate from the taxpayer’s regular NOL. 

Section 708 also includes a provision that allows taxpayers to elect to disregard the five-year carryback rule for their qualified disaster loss. . 

Finally, Section 708 provides an exception to the general rule that a taxpayer may use an alternative minimum tax (AMT) net operating loss deduction to offset only 90 percent of the taxpayer’s alternative minimum taxable income. Section 708 provides that the 90-percent limit does not apply to the portion of the AMT net operating loss deduction attributable to a qualified disaster loss. 

These rules apply to disasters declared in taxable years beginning after Dec. 31, 2007.  

Section 712 provides that these changes to the law do not apply to the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008.

Section 709: Waiver of Certain Mortgage Revenue Bond Requirements Following Federally Declared Disasters

Section 709 of the National Disaster Relief Act adds new paragraph 12 to section 143(k) of the Internal Revenue Code, which waives certain mortgage revenue bond requirements otherwise applicable where an affected taxpayer’s principal residence is destroyed or damaged as a result of a federally declared disaster. An earlier law, the Housing Assistance Tax Act of 2008 enacted on June 30, 2008, also added a different §143(k)(12) to the Code. So currently there are two §143(k)(12)s in the Code.

New Code section 143(k)(12)(A) provides that, at the election of the taxpayer, if a person’s principal residence is destroyed –– the home is rendered unsafe for use as a result of a federally declared disaster occurring between Dec. 31, 2007 and Jan. 1, 2010, or the home is demolished or relocated because of an order issued as a result of such federally declared disaster occurring during such timeframe –– then for two years following the date of such disaster, the three-year requirement of section 143(d)(1) does not apply and the purchase price requirement is relaxed. Accordingly, such person may receive a mortgage loan financed with the proceeds of tax exempt qualified mortgage bonds regardless of whether he owned his principal residence within three years of receiving such mortgage loan, and such mortgage loan may be for the acquisition of a home which costs 110 percent of the average area purchase price. 

New Code section 143(k)(12)(B) provides that, at the election of the taxpayer, if a person’s principal residence is damaged as a result of a federally declared disaster occurring after Dec. 31, 2007, and before Jan. 1, 2010, any loan taken by such person to repair or reconstruct such residence in an amount equal to the lesser of the cost of such repair or reconstruction or $150,000 may be treated as a qualified rehabilitation loan and thus may be financed using the proceeds of tax-exempt qualified mortgage bonds. An election, once made, cannot be revoked unless permission is granted by the Secretary. 

Section 709 further provides that a taxpayer who makes a section 143(k)(12) election  may not also elect to apply the special rules for residences located in disaster areas found in Code section 143(k)(11). The special rules found in Code section 143(k)(11) allow taxpayers to use the proceeds of tax exempt qualified mortgage bonds issued between May 1, 2008, and Jan. 1, 2010, to finance mortgage loans for residences located in disaster areas for two years from the date of the applicable disaster declaration without regard to the three-year requirement by treating the residence as if it were a targeted area residence for purposes of the purchase price requirement and the income requirements. This provision, unlike § 143(k)(12), does not limit the financing only to those taxpayers whose homes were damaged by the disaster.

Section 712 provides that these changes to the law do not apply to the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008.

Section 710: Special Depreciation Allowance for Qualified Disaster Property

Section 710 of the National Disaster Relief Act provides a special 50 percent depreciation allowance for purchases of qualified disaster assistance property. It allows taxpayers to deduct 50 percent of the cost of qualified disaster assistance property in addition to the regular depreciation allowance that is normally available.

This new special “bonus depreciation” allowance applies to most types of tangible personal property and computer software acquired on or after the date on which the federally declared disaster occurs, and placed in service on or before Dec. 31 of the third year following the date on which the federally declared disaster occurs. In addition, the new bonus depreciation allowance applies to most nonresidential real property and residential rental property acquired on or after the date on which the federally declared disaster occurs, and placed in service on or before Dec. 31 of the fourth year following the date on which the federally declared disaster occurs.

To qualify for the new bonus depreciation allowance, 80 percent or more of the use of the property must be in the disaster area and in the active conduct of a trade or business by the taxpayer in that disaster area. Also, the property owner must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the federally declared disaster and must be similar in nature to, and located in the same county as, the property being rehabilitated or replaced.

Section 711: Increased Expensing for Qualified Disaster Assistance Property

In general, a taxpayer may elect to expense up to a certain amount or dollar limit of section 179 property placed in service during the tax year. However, this dollar limit is reduced, but not below zero, if the cost of section 179 property placed in service during that year exceeds a certain amount, or reduced dollar limit. For 2008, the dollar limit is $250,000 and the reduced dollar limit is $800,000.

Section 711 of the National Disaster Relief Act increases the limits that businesses can expense for qualified section 179 disaster assistance property. Generally, the new law increases the dollar limit that is normally available for a particular tax year by the lesser of $100,000, or the cost of qualified section 179 disaster assistance property placed in service during that year. Also, the new law generally increases the reduced dollar limit that is normally available for a particular year by the lesser of $600,000, or the cost of qualified section 179 disaster assistance property placed in service during that year.    

Qualified section 179 disaster assistance property is section 179 property that is qualified disaster assistance property for purposes of the new bonus depreciation allowance provided under section 710 of the National Disaster Relief Act. Section 179 property is most types of tangible personal property and off-the-shelf computer software.

The new law did not change the amount that a taxpayer can elect to expense for certain sport utility vehicles and certain other vehicles placed in service during the tax year.  Accordingly, a taxpayer cannot elect to expense more than $25,000 of the cost of these types of vehicles.

Section 712: Coordination with Heartland Disaster Relief

Section 712 of the National Disaster Relief Act explains that certain provisions contained in the National Disaster Relief Act do not apply to the Midwestern Disaster Areas. For information specific to the Midwestern Disaster Areas, see Publication 4492-B.

Reporting Losses from a Federally Declared Disaster Occurring in 2010

The National Disaster Relief Act of 2008, Subtitle B or Title VII of the Emergency Economic Stabilization Act of 2008, provided enhanced tax relief for victims of federally declared disasters occurring after Dec. 31, 2007, and before Jan. 1, 2010. Those provisions are not effective for disasters occurring after Dec. 31, 2009. Legislation extending the provisions to disasters occurring before Jan. 1, 2011, has been proposed but has not yet been signed into law.

Because the enhanced casualty loss provisions are not effective for federally declared disasters occurring after Dec. 31, 2009, taxpayers affected by federally declared disasters in 2010 may take the loss into account for tax year 2009. See Page 12 of the 2009 version of Publication 547 for information on elections to deduct disaster losses in the year preceding the disaster year, including the time limits on making such elections.

This means, if you are an affected taxpayer with respect to a federally declared disaster occurring after Dec. 31, 2009, you may claim the loss on your 2009 income tax return. Claiming a loss on your 2009 return will allow you to take advantage of the National Disaster Relief Act provisions effective for tax year 2009. 

Page Last Reviewed or Updated: 20-Mar-2014

The File Taxes Online 1040ez

File taxes online 1040ez Index A Active participation, Active participation. File taxes online 1040ez Activity Appropriate economic unit, Appropriate Economic Units Nonpassive, Activities That Are Not Passive Activities Trade or business, Passive Activities Amounts borrowed, Amounts borrowed. File taxes online 1040ez Amounts not at risk, Amounts Not At Risk, Other loss limiting arrangements. File taxes online 1040ez Appropriate economic unit, Appropriate Economic Units Assistance (see Tax help) At-risk activities Aggregation of, Aggregation of Activities Separation of, Separation of Activities At-risk amounts, At-Risk Amounts Government price support programs, Effect of government price support programs. File taxes online 1040ez Increasing amounts, Effect of increasing amounts at risk in subsequent years. File taxes online 1040ez Nonrecourse financing, Nonrecourse financing. File taxes online 1040ez At-risk limits, At-Risk Limits Closely held corporation, Closely held C corporation. File taxes online 1040ez Loss defined, Loss defined. File taxes online 1040ez Partners, Loss limits for partners and S corporation shareholders. File taxes online 1040ez S corporation shareholders, Loss limits for partners and S corporation shareholders. File taxes online 1040ez Who is affected, Who Is Affected? At-risk rules Activities covered by, Activities Covered by the At-Risk Rules Exceptions to, Exception for holding real property placed in service before 1987. File taxes online 1040ez Excluded business, Qualifying business. File taxes online 1040ez Qualified corporation, Qualified corporation. File taxes online 1040ez Qualifying business, Qualifying business. File taxes online 1040ez Recapture rule, Recapture Rule B Borrowed amounts, Amounts borrowed. File taxes online 1040ez C Closely held corporation, Closely held C corporation. File taxes online 1040ez Commercial revitalization deduction, Commercial revitalization deduction (CRD). File taxes online 1040ez Corporations Closely held, Corporations. File taxes online 1040ez , Corporations. File taxes online 1040ez Controlled group of, Controlled group of corporations. File taxes online 1040ez Personal service, Corporations. File taxes online 1040ez , Corporations. File taxes online 1040ez Qualified, Qualified corporation. File taxes online 1040ez CRD, Commercial revitalization deduction (CRD). File taxes online 1040ez D Deductions, passive activity, Passive Activity Deductions Disabled farmer, Retired or disabled farmer and surviving spouse of a farmer. File taxes online 1040ez Disclosure requirement, Appropriate Economic Units Dispositions Death, Dispositions by death. File taxes online 1040ez Gift, Dispositions by gift. File taxes online 1040ez Installment sale, Installment sale of an entire interest. File taxes online 1040ez Partial, Partial dispositions. File taxes online 1040ez E Excluded business, definition of, Qualifying business. File taxes online 1040ez F Farm loss, Excess Farm Loss Farmer, Retired or disabled farmer and surviving spouse of a farmer. File taxes online 1040ez Form 6198, Form 6198. File taxes online 1040ez 8582, Step Three—Completing Form 8582 8810, Who Must Use These Rules? Former passive activity, Treatment of former passive activities. File taxes online 1040ez Free tax services, Free help with your tax return. File taxes online 1040ez G Grouping passive activities, Grouping Your Activities H Help (see Tax help) I Income, passive activity, Passive Activity Income L Limited entrepreneur, Limited entrepreneur. File taxes online 1040ez Limited partners, Limited partners. File taxes online 1040ez M Material participation, Material Participation, Corporations. File taxes online 1040ez Modified adjusted gross income, Phaseout rule. File taxes online 1040ez N Nonrecourse loan, Nonrecourse financing. File taxes online 1040ez P Participation, Participation. File taxes online 1040ez Active, Active participation. File taxes online 1040ez Material, Material Participation Passive activity, Passive Activity Limits Comprehensive example, How To Report Your Passive Activity Loss Disposition, Dispositions Former, Treatment of former passive activities. File taxes online 1040ez Grouping, Grouping Your Activities Limits, Passive Activity Limits Material participation, Material Participation Rental, Rental Activities Rules, Passive Activities, Grouping Your Activities Who must use these rules, Who Must Use These Rules? Passive activity deductions, Passive Activity Deductions Passive activity income, Passive Activity Income Passive income, recharacterization of, Recharacterization of Passive Income Publications (see Tax help) Publicly traded partnership, Publicly Traded Partnership, Publicly traded partnership (PTP). File taxes online 1040ez Q Qualified person, nonrecourse financing, Qualified person. File taxes online 1040ez Qualifying business, at-risk rules, Qualifying business. File taxes online 1040ez R Real estate professional, Real Estate Professional Recapture rule under at-risk limits, Recapture Rule Recharacterization of passive income, Recharacterization of Passive Income Reductions of amounts at risk, Reductions of Amounts At Risk Related persons, Related persons. File taxes online 1040ez Rental activity $25,000 offset, Special $25,000 allowance. File taxes online 1040ez Active participation, Active participation. File taxes online 1040ez Exceptions, Exceptions. File taxes online 1040ez Phaseout rule, Phaseout rule. File taxes online 1040ez Real estate professional, Real Estate Professional Retired farmer, Retired or disabled farmer and surviving spouse of a farmer. File taxes online 1040ez S Section 1245 property, Section 1245 property. File taxes online 1040ez Self-charged interest, Self-charged interest. File taxes online 1040ez Separate activity, Separation of Activities Significant participation passive activities, Significant Participation Passive Activities Special $25,000 allowance, Special $25,000 allowance. File taxes online 1040ez Surviving spouse of farmer, Retired or disabled farmer and surviving spouse of a farmer. File taxes online 1040ez T Tax help, How To Get Tax Help Trade or business activities Definition of, Trade or Business Activities Real property, Real property trades or businesses. File taxes online 1040ez W Worksheet 1, Worksheet 1. File taxes online 1040ez Worksheet 3, Worksheet 3. File taxes online 1040ez Worksheet 4, Step Four—Completing Worksheet 4 Worksheet 5, Step Five—Completing Worksheet 5 Worksheet 6, Step Six—Using Worksheets 6 and 7 Worksheet 7, Step Six—Using Worksheets 6 and 7 Worksheet A, Worksheet A. File taxes online 1040ez , Worksheet A. File taxes online 1040ez Significant Participation Passive Activities Worksheet B, Worksheet B. File taxes online 1040ez , Worksheet B. File taxes online 1040ez Significant Participation Activities With Net Income Prev  Up     Home   More Online Publications