[editor's note, by azindy] I have never asked for recommends, ever. But I am making an exception now. These tax law changes may have serious implications for many taxpayers. some who have previously filed the more advantageous Head of Household will have to file the least advantageous Single. Finding out about this in the Spring will most certainly be too late to take the change in account in tax planning. Even now, it may be a little late as the tax year is more than half over.
Suppose you are a man who lives with a divorced woman with two children. You are not the biological father of the children. She is not working outside the home. You haven't married the mother. You are the breadwinner; you pay 100% of the support of all four people. In 2004, you could claim the kids. You could file Head of Household. You could claim the child tax credit, and possibly the additional child tax credit. Depending on your income, you might have been able to claim Earned Income Credit.
Or perhaps you live this scenario: (I'm not making this one up; I was this taxpayer for six years). One of your more distant in-laws is having serious problems, but doesn't want government interference in her child care decisions. So she asks you to privately take her child in as a foster child. She paid no compensation. The child lived with you 100% of the time and you paid paid 100% of her support. In 2004, you could treat her as one of your own for tax purposes.
No longer. If you are in any situation where you are paying more than 50% of the support for any child who can be claimed as someone's else's qualifying child according to the new Uniform Rules for Qualifying Child and Relatives, you may not claim that child, even if that someone else does not claim the child.
You may not file as Head of Household unless you have a qualifying child of your own. You may not claim that child for Dependent and Child Care Expenses, you may not claim the Child Tax Credit or the refundable Addtional Child Tax Credit. You may not claim the child for Earned Income Credit.
If you are in the introductory situation, maybe you should think about buying a ring and popping the question soon, because in order for you to claim all those tax benefits for 2005, you will have to be married to the mother.
