Wednesday, August 6, 2008


This post first appeared here at TWTP in August of 2007 – but I felt it was appropriate to repeat it as a “1040 FYI”.

Generally in order to claim someone as a dependent on your tax return you must provide more than half of the person’s total support (there are other requirements – see IRS
Publication 501 - Exemptions, Standard Deduction, and Filing Information).

If you do not provide more than half of the total support for a qualifying family member, an elderly parent for example, but you do pay more than 10% of the person’s support, and you and other members of your family together pay more than half of the person’s total support you can claim the family member as a dependent under a multiple support agreement. Only one of the family members who provide at least 10% of the person’s support can claim the person being supported as a dependent. A different qualifying family member can claim the dependency exemption each year.

The qualifying persons who are not claiming the exemption must sign a
Form 2120 (Multiple Support Declaration), which is attached to the tax return of the person claiming the exemption. Here are some examples from IRS Publication 501:
Example 1 - You, your sister, and your two brothers provide the entire support of your mother for the year. You provide 45%, your sister 35%, and your two brothers each provide 10%. Either you or your sister can claim an exemption for your mother. The other must sign a statement agreeing not to take an exemption for your mother. The one who claims the exemption must attach Form 2120, or a similar declaration, to his or her return and must keep the statement signed by the other for his or her records. Because neither brother provides more than 10% of the support, neither can take the exemption and neither has to sign a statement.
Example 2 - You and your brother each provide 20% of your mother's support for the year. The remaining 60% of her support is provided equally by two persons who are not related to her. She does not live with them. Because more than half of her support is provided by persons who cannot claim an exemption for her, no one can take the exemption.
Example 3 - Your father lives with you and receives 25% of his support from social security, 40% from you, 24% from his brother (your uncle), and 11% from a friend. Either you or your uncle can take the exemption for your father if the other signs a statement agreeing not to. The one who takes the exemption must attach Form 2120, or a similar declaration, to his return and must keep for his records the signed statement from the one agreeing not to take the exemption.”
Jane Q Taxpayer and her three brothers each provide 20% of the total support for their mother, who lives in an assisted living facility. The remaining 20% is provided by Social Security. Each year at tax time they get together and compare situations to determine which sibling would receive the most overall federal, state and local income tax benefit by claiming the mother as a dependent. When the refunds come, the person claiming the exemption gives each of his/her siblings a check for ¼ of the total tax benefit.

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