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Income Tax FAQs

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Q: A minister receives a salary plus a housing allowance. Is the housing allowance income? Where does the minister report it?

  • A:
    • A minister's housing allowance, sometimes called a parsonage allowance or a rental allowance is excludable from gross income for income tax purposes, but not for self-employment tax purposes.
    • If you are a minister and receive as part of your salary (for services as a minister) an amount officially designated as a rental allowance, you can exclude from gross income the amount that is used to provide or rent a home.
      • The exclusion is limited to the lesser of the fair market rental value (including furnishing, utilities, garage, etc.) of the amount officially designated (in advance of payment) as a rental or housing allowance, or the actual amount used to provide a home, and cannot exceed what is reasonable pay for your services.
      • The payments must be used in the year received.
    • If housing is furnished to you by your congregation as pay for your services as a minister, the exclusion cannot be more than what is reasonable pay for your services, and is limited to the fair market rental value (including furnishings, utilities, garage, etc.) of the home.
    • The amount of the allowance that cannot be excluded should be entered with your wages on line 7 of Form 1040.

Q: Are alimony payments considered taxable income?

  • A:

    Alimony, separate maintenance, and similar payments from your spouse or former spouse are taxable to you in the year received:

    To help determine if these payments are considered alimony, please read the following rules that apply to payments under divorce or separation instruments executed after 1984. They also apply to instruments that were modified after 1984 to specify that the following rules apply or to change the amount or period of payment or to add or delete any contingency or condition.

    A payment to or for a spouse or former spouse under a divorce or separation instrument is alimony, if the spouses do not file a joint return with each other, if all the following conditions are met:

    1. The payment must be made by cash, check, money order, etc.
    2. The instrument does not designate the payments as not includible in the gross income of the recipient spouse and not deductible by the payor spouse.
    3. The spouses are not members of the same household at the time the payments are made. Exception: If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree or court order may qualify as alimony even if you are members of the same household at the time of payment.
    4. There is no liability for payments after the death of the recipient spouse.
    5. The payment is not treated as child support.

    For the rules for alimony payments under pre-1985 instruments, please see Form 504, Divorced or Separated Individuals.

Q: Are child support payments considered taxable income?

  • A:

    No, child support payments are neither deductible by the payer nor taxable to the payee.

    When you total your gross income to see if you are required to file a tax return, do not include child support payments received.

    Additional information:

Q: Are proceeds paid under a life insurance contract taxable and do they have to be reported as income?

  • A:

    Generally, if you receive the proceeds under a life insurance contract because of the death of the insured person, the benefits are not includable in gross income and do not have to be reported:

    • Any interest you receive would be taxable and would need to be reported just like any other interest received.
    • If the policy was transferred to you for cash or other valuable consideration, the exclusion for the proceeds is limited to the sum of the consideration you paid, additional premiums you paid, and certain other amounts.
    • There are some exceptions to this rule. For additional information, see Publication 525, Taxable and Nontaxable Income.

Q: Are the amounts a taxpayer receives from a "reverse mortgage" taxable or non taxable income? I've looked in publications 525, 936, 530 and 17 and couldn't find any relevant information.

  • A:

    Interest on a reverse mortgage loan that is added monthly to the outstanding loan balance as it accrues is neither includible in a cash method lender's gross income nor deductible by a cash method borrower at the time it is added.

    • The primary purpose of a reverse mortgage loan is to enable elderly persons with limited incomes to remain in their homes.
    • Repayment of the loan is due when the principal amount has been fully paid to the borrower (they receive monthly allotments),
    • The residence that secures the loan is sold,
    • The borrower dies, or
    • The borrower ceases to use the home as the borrower's principal residence.

    Additional Information:

Q: Can a person claim a girlfriend as a wife if they have a child, or do they have to be married?

  • A: You are considered married if you are living together in a common law marriage that is recognized in the state where you now live, or in the state where the common law marriage began. If you are considered married, then you may file as married filing jointly. If you are not considered married, then you would have to file as single or head of household.

    In order to claim your girlfriend as a dependent:

    • Your relationship must not be in violation of local law
    • Your girlfriend must have lived with you for the entire year
    • The following five dependency exemption tests must be met:
      • Member of household or relationship test
      • Citizenship test
      • Joint return test
      • Gross income test
      • Support test

Q: How do you claim a child if you agree with your ex-spouse to claim him six months, and your ex claims him the other six months of the year?

  • A: The dependency exemption cannot be split. The parents need to decide who will claim the child. The parent relinquishing the dependent should sign a Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, provide it to the claiming parent, and thus authorize him or her to claim the exemption. The claiming parent would then need to attach the Form 8332 to his or her tax return. Please be aware that if you relinquish the exemption, you are also relinquishing eligibility for the Child Tax Credit.

    In the absence of a Form 8332, the special rule for children of divorced or separated parents usually gives the dependency exemption to the custodial parent (the parent who has custody for the larger part of the year). Under the special rule, the parent who had custody of the child for the greater part of the year (the custodial parent) is generally treated as the parent who provided more than half of the child's support. This parent is usually allowed to claim the exemption for the child if the other exemption tests are met. However, the noncustodial parent may be treated as the parent who provided more than half of the child's support if certain conditions are met.

Q: How much does a student have to make before he or she has to file an income tax return?

  • A: If you're an unmarried dependent, you must file a tax return if you have earned income of more than a certain amount, which varies each year.

    Even if you don't have to file, you should file a federal income tax return to get money back if any of the following apply:

    • You had income tax withheld from your pay
    • You qualify for the earned income credit
    • You qualify for the additional child tax credit

    Refer to IRS Publication 501, Exemptions, Standard Deduction and Filing Information, for an explanation of the five exemption tests and filing requirement rules.

Q: I am a student attending college and working part-time. Do I have to file a tax return?

  • A: If you can be claimed as a dependent on another person's return, single and under age 65, you must file a return if any of the following circumstances apply:
    • Your unearned income was more than $700. Unearned income includes taxable interest, dividends, capital gains, and trust distributions. If you had an investment loss, your unearned income could be a negative amount.
    • Your earned income was more than $4,400. Earned income includes wages, tips, taxable scholarship and fellowship grants, and salaries.
    • Your total income was more than the larger of $700 or your earned income (up to $4,150) plus $250.

    If you file Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, your total income is the same as your adjusted gross income.

    If you're 65 or older, or married, refer to the instructions in your tax package or IRS Publication 929, Tax Rules for Children and Dependents, or Publication 501, Exemptions, Standard Deduction, and Filing Information.

Q: I am divorced and pay child support. My children live with their mother and she claims them on her tax returns. Can I claim "head of household"

  • A: You can only file as head of household if you meet all of the following requirements:
    • You are unmarried or considered unmarried on the last day of the year
    • You paid more than half the cost of keeping up a home for the year
    • A qualifying person must live with you in the home for more than half the year (except for temporary absences such as school)

Q: I am receiving long-term disability. Is it considered taxable?

  • A:

    If you receive an award is listed on a Form 1099-Misc, box-3 other income for $4725.00 with no withholding, than this is reported on line for Other Income on the Form 1040 (PDF).

    • As with many foundations of this nature, tax information can be found on the website for the organization.
    • Visit to website for the foundation for information on their programs and assistance with this issue.

Q: I have a court order that says I have the tax exemption for my minor child until further order of the court. Can I just send a copy of the court order with my prepared taxes, or do I have to have a waiver signed by the other parent?

  • A: If your divorce decree or separation agreement went into effect after 1984 and it states you can claim the child as your dependent without regards to any condition (such as payment of support), you can attach a copy of the following pages from the decree or agreement instead of Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents:
    • Cover page (write other parents social security number on this page)
    • The page that states you can claim the child as a dependent
    • Signature page with the other parent's signature and the date of the agreement

    If the court order that you're referring to is not a divorce decree or separation agreement and is not a modification to an existing divorce decree or separation agreement, then Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, must be attached to your tax return.

Q: I received a Form 1099-MISC with an amount in box 7, (nonemployee compensation). What forms and schedules should be used to report income earned as an independent contractor?

Q: I received an academic scholarship that is designated to be used for tuition and books. Is this taxable?

  • A:

    Qualified scholarships and fellowships are treated as tax-free amounts if all of the following conditions are met:

    1. You are a candidate for a degree at an educational institution
    2. Amounts you receive as a scholarship or fellowship are used for tuition and fees required for enrollment or attendance at the educational institution, or for books, supplies, and equipment required for courses of instruction.
    3. The amounts received are not a payment for your services unless required by the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program.

    Additional Information

Q: If two single people (never married) have a child and have always lived together providing equal support for that child, can they both claim "head of household" status?

  • A: Only the person who paid more that half the cost of keeping up a home for the year would qualify for the head of household filing status. If both people paid exactly the same amount, neither would qualify for the head of household filing status

Q: If you have a child who works, but is still in high school, can the parents claim him or her as a dependent, or does the student file his or her own taxes?

  • A: You can claim your child as a dependent as long as you meet the five dependency exemption tests and your child does not claim his personal exemption. A full time student under the age of 24 at the end of the year isn't subject to the gross income test. The child should file his own tax return, but should not claim his personal exemption.

Q: If you pay child support, are you allowed to deduct anything on your taxes, or claim the child as an exemption?

  • A: Nothing can be deducted for the child support payments. Child support payments are neither deductible by the payer, nor taxable income to the payee. You may qualify to claim the child as a dependent. There is a special rule for children of divorced or separated parents, which usually gives the dependency exemption to the custodial parent. Under the special rule, the parent who had custody of the child for the greater part of the year (the custodial parent) is generally treated as the parent who provided more than half of the child's support. This parent is usually allowed to claim the exemption for the child if the other exemption tests are met. However, the noncustodial parent may be treated as the parent who provided more than half of the child's support if certain conditions are met.

    If the parents have never been married, the special rule does not apply. In order to claim an exemption for your dependent child without having been married, you must meet the following five tests:

    • Member of household or relationship test
    • Citizenship test
    • Joint return test
    • Gross income test
    • Support test

Q: I'm single, live alone and have no dependents. Can I file as "head of household"

  • A: No. To use this filing status, you must have paid over half the cost of keeping up a home for you and a child or other qualifying person for over half the year.

Q: Is the money received from the sale of inherited property considered taxable income?

  • A:

    To determine if the sale of inherited property is taxable, you must first determine your basis in the property. The basis of inherited property is generally one of the following:

    • The fair market value (FMV) of the property on the date of the decedent's death.
    • The FMV of the property on the alternate valuation date if the executor of the estate chooses to use alternate valuation. See the Form 706 Instructions, United States Estate (and Generation-Skipping Transfer) Tax Return.

    If you or your spouse gave the property to the decedent within one year before the decedent's death, see <Publication 551, Basis of Assets.

    Report the sale on Form 1040, Schedule D (PDF), Capital Gain and Losses:

    • If you sell the property for more than your basis, you have a taxable gain.
    • For information on how to report the sale on Schedule D, please see Publication 550, Investment Income and Expenses.

    Additional Information

Q: Is there an age limit on claiming children as dependents?

  • A: Age will not prevent you from claiming your children as dependents. As long as your child meets the following five dependency exemption tests, you may claim him or her.

Q: My child has joined Americorps and has received an income statement. Are these payments taxable?

  • A:

    If you receive an award is listed on a Form 1099-Misc, box-3 other income for $4725.00 with no withholding, than this is reported on line for Other Income on the Form 1040.

    • As with many foundations of this nature, tax information can be found on the website for the organization.
    • Visit to website for the foundation for information on their programs and assistance with this issue.

Q: My child is 21 and goes to college part-time. Can I claim her as a dependent, or does she have to be a full-time student before I can claim her?

  • A: Your child is over the age of 19 and not a full-time student. Therefore, she is subject to the gross income test. If she meets the gross income test and the following five tests, you may claim the dependency exemptions for her:
    • Member of household or relationship test
    • Citizenship test
    • Joint return test
    • Gross income test
    • Support test

Q: My child lives at home, but is filing her own tax return this year. Can I still claim her when I file?

  • A: If dependents are filing their own tax return, and if they're eligible to be claimed as a dependent on their parent's (or someone else's) return, they can't claim their own personal exemptions on the tax returns they file. In this case, your daughter should check the box on her return that someone else can claim her as a dependent.

    If you're filing your own tax return, and no one else is eligible to claim you as a dependent, then you'd claim your personal exemption on the tax return you file and wouldn't be listed as a dependent on anyone else's return.

Q: My daughter was born at the end of the year. We are still waiting for a social security number. Can I send in my return and later supply the social security number for her?

  • A: If you file your return claiming your daughter as a dependent and do not provide her social security number on the return, the dependent exemption will be disallowed. You could file your income tax return without claiming your daughter as a dependent. After you receive her social security number, you could then amend your return on Form 1040X, Amended U.S. Individual Income Tax Return. You have three years from the later of the due date of the return or from the date the return was filed to amend the return.

    The other option is to file a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. This would give you an additional four months to file your return. By then, you should have your daughter's social security number.

Q: My divorce decree states my ex-husband is allowed to claim one of our two children who live with me. He is very behind in child support. Can I claim both children?

  • A: The answer depends on the year of the divorce decree and its exact wording:
    • If the divorce decree state's that your spouse must pay child support to claim the child as a dependent and if the child lived with you for more than half the year, then you can claim the child as a dependent on you return
    • If the divorce decree was executed after 1984 and it unconditionally entitles your spouse to the exemption, then you spouse gets to claim the child as a dependent
    • If the divorce decree that entitles the noncustodial parent to the exemption was executed prior to 1985 (and not modified) and the noncustodial parent paid at least $600 of child support, then the noncustodial parent gets to claim the child as a dependent.

Q: My seven-year-old son lived in my household for seven months of the year, and I provided all of his support. I paid child support to his other parent for the other five months. Can I claim my son as a dependent and for a child tax credit, without Form 8332?

  • A: There is a special rule for children of divorced or separated parents, which usually gives the dependency exemption to the custodial parent. The custodial parent is defined as the parent who has custody of the child for the greater part of the year. If you can claim your son as a dependent and he is under age 17 at the end of the tax year and a citizen or resident of the United States, you may be able to claim the Child Tax Credit.

    Under the special rule, the parent who had custody of the child for the greater part of the year (the custodial parent) is generally treated as the parent who provided more than half of the child's support. This parent is usually allowed to claim the exemption for the child if the other exemption tests are met. However, the noncustodial parent may be treated as the parent who provided more than half of the child's support if certain conditions are met.

Q: My son is a newspaper carrier. I would like to know if this income is subject to Social Security and Medicare tax and if I must file a Schedule C for him?

Q: My son was born on December 31st. Can I claim him as a dependent? If so, will he also qualify me for the Child Tax Credit?

  • A: If your child was born alive during the year, and the exemption tests are met, you can take the full exemption. You would be entitled to a Child Tax Credit for each of your children for whom you can claim an exemption.

Q: My wife and I are filing separate returns. We have one child and want to know if we can both claim him on our separate returns?

  • A: You can claim a dependency exemption only on one return, and only if you are the person who meets the following five tests:
    • Member of household or relationship test
    • Citizenship test
    • Joint return test
    • Gross income test
    • Support test

Q: My wife and I have been separated since May. She has one child (a grandchild) living with her. Can we both file as "single"

  • A: You and your wife can file either as married filing jointly, or married filing separately. Your wife might qualify as head of household since the grandchild may be a qualifying person for that status. If she does, you would have to file as married filing separately. Refer to IRS Publication 501, Exemptions, Standard Deduction, and Filing Information, for more information.

Q: Of my allocated tips, I tip-out 15% to the busboy and 5% to the bar. Where do I deduct this on my tax return?

  • A:

    You cannot deduct tip-outs (the tips you split with other employees) on your tax return. Nor can you deduct them from your allocated tips:

    • The practice of tipping-out is one of the reasons you should keep a detailed daily log of your tips.
    • If you documented that you tip-out, and you reported all your tips to your employer, then you do not include in your income the allocated tips in box 8 of Form W-2 (PDF).

    Tipping-out, by itself, should not cause an allocated tip situation:

    • When you report the cash tips you receive, you should first report the total tips, then the amount tipped-out. Publication 1244 (PDF), Employee's Daily Record of Tips and Report to Employer, includes Forms 4070 and 4070A, Employee's Report of Tips to Employer that provides lines to record:
      • Cash tips received
      • Credit card tips received
      • Tips paid out
      • Net tips
    • The detail of the information provided should enable your employer to develop a reasonable, fair, and accurate method for determining whether tips need to be allocated, and, if so, how much.
    • Employers who operate large food and beverage establishments are only required to allocate tips if the total tips reported by all the employees who customarily receive tips are less than 8% of gross sales.
    • When there is a tip-splitting arrangement, it is important that all tips, including those received through tip-splitting, be reported to the employer by each employee who receives $20 or more in a month.

    Additional Information

Q: What constitutes proper proof of more than 50% of support?

  • A: You must provide more than half of a person's total support during the calendar year to meet the support test. You determine this by comparing what you contributed with the entire amount of support the person received from all sources. There is a worksheet in IRS Publication 501, Exemptions, Standard Deduction and Filing Information, that identifies the elements of support and can assist you in making this determination. Please refer to IRS Publication 552, Record Keeping for Individuals, in regard to what constitutes proof.

Q: What, if any, quarterly forms must I file to report income as an independent contractor?

  • A:

    Because you generally will have no taxes withheld from your income, you may need to make quarterly estimated tax payments:

    • For information on how to make estimated tax payments refer to Form 1040-ES (PDF), Estimated Tax for Individuals.

    You need to be aware that there may be state and local requirements for estimated tax payments:

    • You can start looking for information at How to Contact Us. You may want to go to your state's individual Web site for additional information.
    • To access the state you need go to our Alphabetical State Index.
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