Number 2 under the Tests to Qualify states that you must keep up a home that you live in with the child or dependent person. You are considered to be keeping up a home if you pay more than half the cost of running it. The home must be the main home for you and your qualifying person, and it will still be the main home even if there are temporary absences because of sickness, school, business, vacation, military service, or a custody agreement (visitation).
The costs of keeping up a home include rent, or property taxes and mortgage interest if you own the home, utilities, home repairs, insurance, and food you eat at home. Costs of keeping up a home do not include clothing, education, medical expenses, vacations, life insurance, transportation, or the principal portion of your mortgage payment, if you own the home.
If your child or other qualifying person did not live in your home all year, you will need to determine if you paid more than half the cost of running the home while the qualifying person lived with you. You take the total cost of running your home for the whole year, divide this by 12 to determine the cost per month, and multiply this by the number of months the qualifying person lived with you. If you paid more than half the cost during that period, you meet the test for keeping up a home.
Earned Income Test
Number 3 under the Tests to Qualify indicates that you (and your spouse) must have earned income. Your earned income for this purpose includes wages, salaries, tips, and other employee compensation, and net earnings from self-employment. Earned income does not include pensions, annuities, social security benefits, workers’ compensation, unemployment, interest, dividends, or scholarships.
As indicated above, there is an exception if your spouse is a student or is unable to care for himself or herself. For purposes of meeting the earned income test, your spouse is considered as having earned income (and therefore qualifies) for any month in which he or she is a full-time student, or is physically or mentally unable to care for himself or herself. This exception applies to only one spouse per month. If you were both students, or were unable to care for yourselves, only one of you would be considered to have earned income for that month.