Answers to “Dear Iris” Letters

1. Dear Doing My Part,
You can claim one child as a dependent and take the dependency exemption if your ex-wife (the custodial parent) signs Form 8332 releasing her claim to the exemption for the child.
(Pub. 4012, page C-8, Table 3, Step 3, 2016 & 2017 versions)

2. Dear Studious Nurse To Be,
Your parents can claim the American Opportunity education credit (AOC) and reduce the tax they have to pay;60% of the AOC education credit is non-refundable. As a student, you probably did not earn enough to pay tax, and since they can claim you as a dependent and you are between 18 and 24 years old, you cannot claim the education credit.
(4012 J-5, 2016; G-1 & J-4, 2017)

3. Dear Poor, Broke, and Lonely,
You make no mention of having children as dependents, so you can’t claim widow status for 2016 or 2017 taxes. (4012 B-1, 2016; B-8, 2017)

4. Dear Wearing The Pants Around Here,
You cannot file as head of household unless you have a qualified relative living with you. (4012 B-3, 2016; B-10, 2017)

5. Dear Second Chance At Motherhood,
Since you are still married, your grandson does not qualify you to file as head of household (HOH). You must file as MFS or MFJ. If you had gotten a divorce, you could claim your grandson and file as HOH. (4012 B-1, 2016; B-8, 2017)

6. Dear Getting Fit in ’17,
You cannot deduct the cost of the weight-loss program (unless it is for treatment of obesity), but you can deduct insulin as a medical expense if you itemize deductions on Schedule A. (4012 F-5, 2016 & 2017)

7. Dear Mom From McIntosh,
Since the afterschool care program allows you to work, the credit for child and dependent care expenses can be claimed on Form 2441. (4012 G-5, 2016 & 2017)

8. Dear Confused Dad,
You can claim both credits for both kids. The child tax credit is non-refundable and can only reduce your tax. The additional child tax credit is refundable and adds to your refund.
(4012 G-8, 2016; G-12, 2017)

9. Dear Hungry and Hopeful,
Social Security benefits may be taxable if there is other income over $25,000. (Pub. 17, p. 84, 2016; Pub. 4012 D-27, 2016; D-45, 2017 shows where to add SSA-1099 info)

10. Dear Financially Supportive Girlfriend,
No, you cannot take the student loan adjustment to your income because your boyfriend is not your dependent. However, your boyfriend can claim the student loan adjustment for the interest you paid because his name is on the loan. (4012 E-6, 2016; E-8, 2017)

11.Dear Fighting Over a Four Month Old,
No, you and your mother cannot both claim your son. But since your Mom can claim you as a dependent, you cannot claim your son or take your own personal exemption. Your mom should claim both you and him and benefit from the 2 exemption deductions.
(4012 C-3 & C-4, 2016 & 2017)

12. Dear Retired in Alabama,
Code 3 on a 1099-R indicates disability pension. But since you are under the minimum retirement age, it is considered earned income, which qualifies you for earned income credit (EIC), dependent care credit, and the additional child tax credit.
(4012 D-23, 2016; D-41, 2017)

13. Dear She Ain’t Heavy,
Whether you can claim your mother as a dependent and file as head of household depends on how your support compares to her social security benefit. If you provide more than 50% of her support, you can claim her.
(4012 C-6 & B-3, footnote 6, 2016; C-6 & B-10, footnote 6, 2017)

14. Dear My Sister’s Warden,
Since your sister’s only income is social security, it is not taxable (even if over $25,000) and she does not need to file a federal return. (4012 A-1, 2016 & 2017) In Michigan she might qualify for property tax credit and home heating credit.

15.Dear Earned But Not Credited,
Since you filed as married filing separately (MFS), that disqualifies you for EIC. (4012 I-2, 2016 & 2017) Since you lived together for part of the last 6 months of the year, you have to file either as MFS or MFJ. (4012 B-1, 2016; B-8, 2017)

16. Dear Hoping For Relief,
Since a partial month’s health insurance counts as a full month for the ACA, you were uninsured for only March and April. This is a short coverage gap of less than 3 months, so you qualify for exemption code B. (4012 ACA-7, 2016; H-14, 2017)

17. Dear Always Learning,
You can claim the lifetime learning credit for tuition. If you were required to purchase the books from the college/university as a condition for enrollment, the books can be claimed.Transportation expenses, including that“stupid parking fee” are not allowed toward the credit.(4012 J-5, J-9, 2016; J-4, J-9, 2017)

18. Dear Well Traveled Tutor,
Volunteer mileage is deductable at 14 cents/mi as a charitable contribution on Schedule A if you have more itemized deductions than the standard deduction of $6350.
(4012 NEW-2, F-1, 2016 & 2017)

19. Dear House Rich But Still Tax Poor,
The standard deduction of $6350 for 2017 is greater than your itemized deductions ($500 + $3600 = $4100), so the mortgage interest does not make a difference in your refund.
(4012 F-1, 2017)

20. Dear Still Supporting This Kid,
The child tax credit of $1000 applies only to children under 17.
(4012 G-9, 2016; G-12, 2017)

21. Dear First Time Home Seller,
The net gain on the house sale is only $5,000 (= $105,000 - $85,000 - $15,000). Since you can exclude $500,000 as a married couple, the sale does not have to be reported as a capital gain on Schedule D unless you received a 1099-S form from the realtor. In any case, the gain can be excluded and no additional tax will be owed.
(4012 D-41, 42, 2016; N-39, D-28, 2017)

CAA Jackson VITA1