Is Family Tax Planning for You

James Maule wrote an interesting article Monday about a tax case involving a man living with his mother and three siblings.  The circumstances of the case were such that the mother didn’t receive any tax benefit for claiming her third child, so the man having taxable income of his own and because the child met all of the tests to be his qualifying child claimed his third sibling on his personal income tax.  The rule as stated at the time would have disallowed the claim if his mother had also claimed the child but the mother and the man had used careful tax planning to receive the maximum benefits allowed.  The rule has since been restated to “may be claimed” and closed this loophole, but still leaves the door open for sibling to claim each other.  If the sibling’s adjust gross income is higher than that of their sibling and parents.  James used this case to illustrate the complication of the tax code and there’s no question he is right, but I’d like to use it to highlight the need for careful tax planning with your tax preparer.  Today, when children are living longer with their parent’s tax planning as a group maybe a beneficial strategy.