We are not married, but we live together and have a child (or children). We are filing our income tax as "single." Who should take the dependency exemption and child tax credit for our child?

Well, as usual, it depends. Whoever takes the dependency exemption ($3,650 per child for 2010) also gets to take the $1,000 tax credit for each child. The benefit to you of taking the deduction for the dependency exemption depends on your tax bracket.

  • If you are in the 28% tax bracket, a $3,650 dependency exemption deduction will save you $1,022—28% of $3,650 deducted.
  • The child tax credit offsets taxes dollar for dollar—a $1,000 child tax credit saves you $1,000, no matter what your tax bracket.

First let's make sure your child qualifies as your dependent. The child qualifies if he or she:

  • Is officially the child of both parents (adoption counts)
  • Is under 19 (or under 24 if a full-time student)
  • Lives with you both
  • Does not provide more than half of his or her own support

You might think that the taxpayer in the highest tax bracket should take the exemption. However, if you file as "single" for 2009 and your income is greater than $166,800 the exemption is reduced.

The child tax credit is $1,000 for each child, but this amount goes down as your gross income as a single person exceeds $75,000.