A niece as another dependent?

Q. I have been supporting my orphaned niece, a minor, since my sister passed away. For tax purposes, can I still claim that she is a dependent even if I have three children of my own? What rules apply in this case?

A. Although helping our nearest of kin is one of our most endearing customs, this does not sit well with our tax laws. "Dependents", for purposes of the additional exemption from income tax on individuals, refers to the legitimate, illegitimate, or legally adopted children of the taxpayer who are living with and are chiefly dependent upon the taxpayer for support. In addition, these dependents should be unmarried, not gainfully employed, and not over 21 years of age.

The 21-year age limit does not apply, however, to a dependent who is incapable of supporting himself or herself due to some mental or physical defect.

In your case, while you are allowed to claim an additional exemption of P8,000 for each dependent not exceeding four, your niece does not qualify under the legal definition of a "dependent" for the purpose of claiming an additional exemption.

(Raymund S. Gallardo is tax partner of Laya Mananghaya & Co./KPMG. Questions and comments are welcome. Messages to the author can be sent by e-mail at [email protected]).