Under a Multiple Support Agreement Sara Can Be Claimed as a Dependent by

Under a Multiple Support Agreement: Understanding Sara’s Dependent Status

When it comes to claiming someone as a dependent on your tax return, it can be a bit complicated. This is especially true when you are sharing the responsibility of supporting an individual with other family members or individuals. In such a scenario, you may be eligible to claim the person as your dependent under a multiple support agreement (MSA).

The term “multiple support agreement” is used to describe an arrangement where two or more individuals provide at least half of the support for a person, but none of them can individually qualify as the person’s “qualifying relative.” This situation is often applicable for children of divorced or separated parents, elderly parents, or relatives with disabilities who receive support from several family members.

Let’s take Sara’s case as an example. Sara is a college student who receives financial support from her parents, grandparents, and a godparent who all contribute equally to her educational and living expenses. Under a MSA, any of these individuals may claim Sara as a dependent for tax purposes if they meet specific IRS requirements.

The IRS defines a qualifying relative in various ways, including:

– Relationship: The person must be related to you or reside with you for the entire year as a member of your household.

– Income: The person cannot have a gross income of more than $4,300 (for 2020), excluding nontaxable Social Security benefits and disability payments.

– Support: The person must depend on you financially, and you must provide at least half of their support during the year.

– Citizenship: The person must be a U.S. citizen, U.S. resident alien, or a resident of Canada or Mexico.

– Filing status: The person cannot file a joint tax return with their spouse (if they have one) unless they are only doing so to claim a tax refund.

In Sara’s case, none of her individual supporters can meet the 50% support requirement. Therefore, they can agree to claim her as a dependent under the MSA rule, provided that they meet all other criteria. According to the IRS, the individuals who contributed to Sara’s support must agree in writing on who will claim her as a dependent in the tax return, and only that person can claim her exemption.

It`s essential to understand that the MSA is not limited to parents and grandparents. Any individual who shares the support of a qualifying relative can make an MSA agreement and claim the dependent exemption. However, the person claiming the exemption must take into account the deductions and credits for which they qualify, such as the child tax credit and education tax credits.

In conclusion, claiming a dependent under a multiple support agreement can be beneficial when several individuals share the responsibility of supporting a qualifying relative. The arrangement requires cooperation and agreement among the supporters and adherence to IRS rules. If you have questions about claiming a dependent under MSA, consult with a tax professional to ensure you are making the right decision.