1. qualifying child
2. qualifying relative

1. relationship test
2. residence test
3. age test
4. joint return test
5. citizenship/residency test
6. not self-supporting test

• must be less than 19 at the end of the tax year, or less than 24 if a fulltime student for at least 5 months of the tax year.
• must be younger than TP
• no age limitation if the individual if permanently and totally disabled

1. if one individual is a parent, they claim the exemption.  the parent can't let someone else claim their child's exemption unless the other eligible individual has higher AGI for the tax year than any other eligible TP
2. 2 parents file seperately, the parent with whom the dependent lives the longest claims exemption
3. if same as "2" and child lives with both parents at the same time, parent with highest AGI claims exemption
4. if none are parents, TP with highest AGI claims exemption

• all common relatives except cousins
• any person who lives in TP home for entire tax year
• qualifying child can't be qualifying relative

1. support test
2. gross income test
3. joint return test
4. citizenship/residency test

1. less than 19 years old
2. less than 24 at end of tax year and is a full-time student for at least five months during tax year

1. multiple support agreements
2. divorced parents

1. except for the support test, each individual in the group would otherwise be eligible to claim the individual as a dependent
2. TP claiming the exemption provided over 10% but less than half of the support
3. a written agreement allocated the dependency exemption to a member of the group. all members providing more than 10% must sign

1. parent with custody (over half of the year) is entitled to dependency exemption in absence of written agreement
2. the custodial parent can waive the exemption to other parent by signing form 8332

• phase-out for wealthy TP triggered by high AGI in 2009 but not in 2010 or 2011
• 2% of total exemptions are lost for each $2,500 increment of AGI above $166,800/$250,200

1. TP's spouse does not live in the home for the last 6 months of calendar year
2. TP must provide more than half the cost of maintaining a home for self and a dependent child

may file as joint-married for two years following death of spouse if TP provides more than half the cost of maintaining the household (rent, mortgage interest, taxes, food, etc.) for a dependent child (can ignore (1) joint return test, (2) gross income test for qualifying relative and (3) dependent can't have other dependents)

1. TP provides more than half of the cost of maintaining the household for a qualifying child or a qualifying relative.  
2. home must be the principle residence for this qualifying child/relative for more than half of the year

1. if the qualifying child is unmarried, the child need not qualify as a dependent
2. if the qualifying relative is a parent, the parent need not live with the TP, but the TP must provide more than 50% of the cost of maintaining the parent's home

1. TP (or spouse) is blind
2. TP (or spouse) turns 65

in 2011, TP who is blind or 65 is granted additional standard deduction of $1,150 if TP is married or is a surviving spouse. otherwise, amount of additional standard deduction is $1,450

• dependent can earn this if claimed as a dependent by another.  
• $950 for 2011

dependent's standard deduction

• can earn a regular standard deduction by earning income
• standard deduction amount is the greater of the mini standard deduction or earned income + $300 (limited to regular standard dedcution)

• designed to discourage TP from giving income-generating property to children in order to have the income taxed at child's low rate
• net unearned income is taxed at the parent's rate, other income is taxed at the child's rate

2 calculations for net unearned income

1. TP who don't itemize: subtract $1,900 from unearned income (2011)
2. TP who do itemize: subract $950 plus itemized deductions allocated to unearned income

1. social security- taxed at 10.4% on first $106,800 (2011).  if wages are earned in addition to SE income, then the ceiling is reduced by amount of wages
2. medicare- 2.9% on all SE income

1. SE inome is gross income from self-employment activities less deductions associated with the activity. (in 2010, health insurance costs for TP spouse and dependents is included, not for 2011)
2. SE income must exceed $400 for application of the SE tax
3. last step in calculating SE tax is to multiply the SE income by 92.35%
4. reminder: one-half of the SE tax is deductible "for" AGI

• separate tax system that calculates a broader tax base by modifying taxable income for both individuals and corporations
• generally increase taxable income 
• only applies to TPers whose net regular liability is less than the "tentative" tax calculated under broad AMT rules

regular taxable income

+/- adjustments

+preferences

AMT income

-exemption

AMT base

x Rate

tentative minimum tax before foreign tax credit

-certain credit

tentative minimum tax

-regular liability

AMT (if positive)

1. applies to MACRS 3, 5, 7, and 10-year property that is depreciated with 200% declining method (150% is used for AMT)     (no AMT adjustment required for assets purchased 2008-2011 that used bonus depreciation)
2. % of completion contract income over completed contract income
3. for itemized deductions: (a)phase-out of itemized deductions is subtracted from taxable income (b) medical deduction is allowed only to extent it exceeds 10% of AGI (c) no deduction is allowed for taxes (d) 2% miscellaneous deductions are not allowed (e) home mortgage interest is deductible only if loan proceeds are used to improve the home
4. personal exemptions and the standard deduction are added back
5. compensation element on the exercise date for an incentive stock option

1. tax-exempt interest on private activity bonds (for bonds issued after july 30, 2008, the interest on tax exempt housing bonds is not treated as a preference item if bonds are for low-income housing developments, mortgage bonds, or mortgage bonds for veterans.  private activity bonds issued in 2009 or 2010, interest is not included)
2. % depletion in excess of cost basis on certain mineral properties
3. 7% of gain excluded from income under the qualified small business stock provision (gain on sale of qualified small business stock that was purchased in 2011 and sold more than 5 years later will not be subject to AMT)

• $48,450 if single/$74,450 if married in 2011
• phase out trigered by AMTI over $112,500/$150,000 at 25% rate 
• for children subject to kiddie tax, AMT exemption can't exceed the sum of the child's income plus $6,800 (2011)
• AMT tax rate is 26% up to $175,000 and 28% over $175,000

1. foreign tax credit
2. child tax credit
3. low-income saver's credit
4. residential energy efficient property
5. american opportunity tax credit
6. qualified plug-in electric drive motor vehical credit

1. for 2010 and 2011: other nonrefundable personal credits may also offset the AMT as well as the regular tax (child and dependent care credit, child tax credit, credit for higher education expenses, and energy credits)
2. preferential rates on capital gains are available for a net capital gain when calculating the AMT tentative tax
3. TP pays greater of the AMT tentative tax or regular tax (before credits)

greater of 

• amount of AMT refundable credit for the preceding tax year
• 50% of the long-term unused minimum tax credit 

• married-joint: $11,600
• head of household: $8,500
• unmarried individuals: $5,800
• Married and filing separate: $5,800