CASE STUDY #13: Permanently and Totally Disabled Older Child
Janice is unmarried and her permanently and totally disabled unmarried child Susan, age 33, lives with her; Janice takes care of Susan.
Dependency Susan – To meet the qualified child tests, the child must meet four tests: principal place of abode, joint return, relationship, and age test. Susan clearly meets all but the age test, which she would normally fail because she is older than 18, and not a full-time student under the age of 24. However, the age requirement is waived when a child is permanently and totally disabled. Thus, Susan is Janice’s qualified child and Janice can take her as a dependent.
Other Issues:
Child Tax Credit: Even though the qualified child age requirements are waived for a permanently disabled child, the child tax credit under age 17 (18 for 2021) requirements continue to apply, so Janice does not qualify for a CTC.
Earned Income Tax Credit (EITC): For purposes of the EITC, a qualifying child is the same definition as under the rules that apply to the dependency. Thus, Susan is a qualified child for EITC, and therefore, if Janice otherwise qualifies, she can claim EITC based on one child.
Child & Dependent Care: Generally, this credit is thought of as allowed only for children under the age of 13. However, if otherwise qualified, a taxpayer can claim it for the care of a spouse or dependent who is physically or mentally unable to care for themselves if they live with the taxpayer more than half of the year.
“ Variation: Older Child Only Temporarily Disabled - Suppose Susan was only temporally disabled (not permanently) because of an accident or medical condition and had W-2 income of $10,000. Thus, she would not be a qualified child because of her age, and neither would she be Janice’s qualifying relative because her income exceeds the personal exemption amount. However, if Susan would have been Janice’s dependent except for failing the gross income test, Susan would have been what is referred to as a medical dependent, and although Janice cannot claim Susan as a dependent, if she itemizes her deductions, she can include any medical expenses she pays for Susan’s care when applying the 7.5% of AGI limitation for medical expenses, and if she otherwise qualifies, except for the gross income, she can also claim the child and dependent care credit. ”
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