Publication 929 - Tax Rules For Children And Dependents

Glossary

•

The definitions in this glossary

For purposes of determining a

to the investment income, plus the

Is neither your qualifying child

dependent’s standard deduction,

are the meanings of the terms as

larger of:

nor the qualifying child of any-

earned income also includes any

used in this publication. The same

one else.

1. $850 plus itemized deductions

part of a scholarship or fellowship

term used in another publication

directly connected with pro-

For details, see Exemptions for De-

grant that the dependent must in-

may have a slightly different mean-

ducing the investment in-

pendents in Publication 501.

clude in his or her gross income.

ing.

come, or

For purposes of completing

Standard deduction. An amount

2. $1,700.

Adjusted gross income. Gross

Form 8615, earned income also in-

(based on filing status, age, and

income (defined later) minus ad-

cludes a taxable distribution from a

blindness) that can be subtracted

justments to income (defined next).

Qualified dividends. Dividends

qualified disability trust.

from adjusted gross income in fig-

eligible for the lower tax rates that

Adjustments to income. De-

Exemption. An amount ($3,300

uring taxable income. The standard

apply to a net capital gain. They are

ductions that are subtracted from

for 2006) that can be subtracted

deduction is not used if itemized

reported to you in box 1b of Form

gross income in figuring adjusted

from income in figuring how much

deductions are claimed.

1099-DIV. You report them on

gross income. They include deduc-

income will be taxed. Exemptions

Form 1040 or Form 1040A, line 9b,

Tax year. The time period cov-

tions for moving expenses, alimony

generally are allowed for the tax-

or Form 1040NR, line 10b. For

payer, the taxpayer’s spouse, and

ered by a tax return. Usually this is

paid, a penalty on early withdrawal

more information, see Publication

dependents.

of savings, and contributions to an

January 1 to December 31, a cal-

550.

individual retirement arrangement

endar year, but taxpayers can elect

Gross income. All income from

(IRA). Adjustments to income can

a fiscal tax year with different be-

Qualifying child. To be your de-

all sources (other than tax-exempt

be taken even if itemized deduc-

ginning and ending dates.

pendent (defined earlier), a person

income) that must be included on

tions (defined later) are not

must be either your qualifying

your tax return.

Taxable income. Gross income

claimed.

child or your qualifying relative

minus any adjustments to income,

I n v e s t m e n t

i n c o m e .

S e e

(defined next). Generally, a per-

Alternative minimum tax. A tax

any allowable exemptions, and ei-

Unearned income, later, and In-

son is your qualifying child if that

designed to collect at least a mini-

ther itemized deductions or the

vestment income defined, earlier,

person:

mum amount of tax from taxpayers

standard deduction.

•

under Step 1. Figuring the Child’s

Is your child, stepchild, foster

who benefit from the tax laws that

Net Investment Income (Form

child, brother, sister, step-

give special treatment to certain

Unearned income. Income other

8615, Part I).

brother, stepsister, or a de-

kinds of income and allow deduc-

than earned income. This is invest-

scendant of any of them,

tions and credits for certain kinds of

Itemized deductions. Deduc-

ment-type income and includes in-

•

expenses.

Lived with you for more than

tions allowed on Schedule A (Form

terest, dividends, and capital gains.

half of the year,

1040) for medical and dental ex-

Distributions of interest, dividends,

Capital gain distribution. An al-

•

penses, taxes, interest, charitable

Did not provide more than

capital gains, and other unearned

located amount paid to, or treated

contributions, casualty and theft

half of his or her own support

income from a trust are also

as paid to, a shareholder by a mu-

losses, and miscellaneous deduc-

for the year, and

unearned income to a beneficiary

tual fund, regulated investment

•

tions. They are subtracted from ad-

Was under age 19 at the end

of the trust. However, for purposes

company, or real estate investment

justed gross income in figuring

of the year (or was under age

of completing Form 8615, a taxable

trust from its net realized long-term

taxable income. Itemized deduc-

24 at the end of the year and

distribution from a qualified disabil-

capital gains. This amount is in ad-

tions cannot be claimed if the stan-

a student, or was any age

ity trust is considered earned in-

dition to any ordinary dividend paid

dard deduction is chosen.

and permanently and totally

to the shareholder. You will receive

come.

disabled).

a statement from the payer if this

Net capital gain. The excess of

Unrecaptured section 1250 gain.

net long-term capital gain over any

applies to you.

For details, see Exemptions for De-

Generally, any part of your net cap-

net short-term capital loss. For

pendents in Publication 501.

Dependent. A person, other than

ital gain from selling section 1250

2006, this is the smaller of the gain

the taxpayer or the taxpayer’s

property (real property) that is due

on line 15 or the gain on line 16 of

Qualifying relative. To be your

spouse, for whom an exemption

Schedule D (Form 1040). If Sched-

to depreciation. For details, see

dependent (defined earlier), a per-

(defined later) can be claimed. To

ule D is not required, net capital

Publication 550.

son must be either your qualifying

be your dependent, a person must

gain is the amount of capital gain

child (defined earlier) or your qual-

28% rate gain. Gain from the

be your qualifying child or qualify-

distributions on Form 1040, line 13;

ifying relative. Generally, a person

sale of collectibles and, generally,

ing relative (both defined later). For

Form 1040A, line 10; or Form

is your qualifying relative if that

more information, see Exemptions

the taxable part of your gain from

1040NR, line 14.

person:

for Dependents in Publication 501.

the sale of qualified small business

•

Lives with or is related to you,

Net investment income. The

stock held more than 5 years. For

•

Does not have $3,300 or

E a r n e d

i n c o m e .

S a l a r i e s ,

total of all investment income

details, see the instructions for

more of gross (total) income,

wages, tips, professional fees, and

(other than tax-exempt income)

Schedule D (Form 1040).

•

other amounts received as pay for

reduced by the sum of the follow-

Is supported (generally more

■

work actually done.

ing: adjustments to income related

than 50%) by you, and

Publication 929 (2006)

Page 23

Publication 929 - Tax Rules For Children And Dependents - 2006 Page 23

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