What is a Multiple Support Agreement
A multiple support agreement is a document which is signed by two or more taxpayers who provide the financial support for a single dependent. This agreement allows several persons who jointly support a dependent to take turns claiming this person as a dependent on their tax returns. Multiple support agreements are necessary in cases where several children contribute to the support of an elderly parent.
BREAKING DOWN Multiple Support Agreement
A taxpayer will get an exemption for a qualifying relative if they furnish more than 50% of the relative's support for a calendar tax year. The 50% threshold may be met by one person or by several people, combining their resources to care for the relative. A taxpayer will not get an exemption if they jointly support the dependent unless they complete a multiple support agreement and file IRS Form 2120.
The dependent must pass the relationship test to be eligible. The relationship test mandates that the person in question must be either a lineal descendant or ancestor, sibling, in-law, niece, nephew, aunt, uncle or anyone other than the taxpayer's spouse who lived in the taxpayer's household during the entire year.
Children who together contribute more than 50% to the support of an aged parent must have a multiple support agreement in place to get an exemption for that parent. Each tax year, only one child may claim the exemption for qualifying dependent's care. When no child is, individually, furnishing more than 50% of the parent's support, none of the children will get the exemption. Using a multiple support agreement, the children may take turns claiming the rescued exemption on their tax returns each year.
The rules governing multiple support agreements are tricky.
- The dependent is a qualifying relative
- A dependent is not a qualifying child
- They receive more than 50% of support from two or more relatives
- The contributing relatives agree to give the exemption to a single, chosen relative
- The selected relative furnishes more than 10% of the dependent’s support which, when combined with funds from other relations, will total at least 50%
- All other relatives who also contribute more than 10% of the funds of, sign multiple support agreements which waive their exemption for that taxable year
- The chosen relative maintains the signed multiple support agreements in a business file
- When filing taxes, the chosen relative attaches IRS Form 2120 to identify the waiving relatives
Example of Multiple Support
Three siblings each provide 20% of the funds to support an elderly parent along with two other relations which each contribute 5%. The parent is a qualifying relative who received 70% support from children and other relatives. The parent can be a dependent because more than 50% of their support was provided. To claim the parent, each of the siblings must sign a multiple support agreement identifying which of the children will claim the dependent for that tax year. The two relations who contributed less than 10% do not need to sign an agreement.
In situations where programs such as social security or other public support funds provide the bulk of support for the dependent, the exemption can not be claimed by the child. As an example, if two children provide 20% support and social security provides 60% of the support, neither child may claim their parent as an exemption.
For more information on multiple support agreements, see Publication 501.