To determine whether you can claim your niece and her son as dependents, we need to evaluate if they meet the criteria for either a "qualifying child" or a "qualifying relative" under the Internal Revenue Code § 152.
Qualifying Child
For an individual to be considered a "qualifying child," they must meet the following criteria under § 152(c)(1):
- Relationship Test: The individual must be your child, stepchild, foster child, sibling, stepsibling, or a descendant of any of them. Your niece and her son meet this requirement as your niece is a descendant of your sibling.
- Principal Place of Abode: The individual must have the same principal place of abode as you for more than half of the taxable year. Since your niece and her son lived with you for seven months, they meet this requirement.
- Age Requirement: The individual must be under 19 at the end of the year, or under 24 if a full-time student, or any age if permanently and totally disabled. This would need to be verified for your niece's son.
- Support Test: The individual must not have provided more than half of their own support for the year. Your niece has no income, and you provided all her support, so she meets this requirement. The same applies to her son if he did not provide more than half of his own support.
- Joint Return Test: The individual must not file a joint return for the year, except to claim a refund of withheld income tax. This would need to be verified for your niece and her son.
Qualifying Relative
If they do not meet the criteria for a "qualifying child," they may still qualify as "qualifying relatives" under § 152(d)(1):
- Relationship Test: The individual must be related to you in one of the ways specified, which includes nieces and their children.
- Gross Income Test: The individual's gross income must be less than the exemption amount for the year. Since your niece has no income, she meets this requirement. This would need to be verified for her son.
- Support Test: You must provide more than half of the individual's support for the year. You provided all the support for your niece and her son, so they meet this requirement.
- Not a Qualifying Child: The individual must not be a qualifying child of any other taxpayer. Given that your niece and her son lived with you and you provided all their support, they are not qualifying children of any other taxpayer.
Conclusion
Based on the information provided:
- Your niece qualifies as a dependent under both the "qualifying child" and "qualifying relative" tests.
- Her son also qualifies as a dependent under both tests, assuming he meets the age requirement and did not provide more than half of his own support.
Therefore, you can claim both your niece and her son as dependents on your tax return.
Sources:
McNair, Debra D. v. Commissioner, T.C. Summary Opinion 2004-115
Publication 17 (2023)
§ 152. Dependent defined
Publication 1380
Publication 501 (2023)
CCA 200812024
