Final answer:
In cases where a child qualifies as a dependent for multiple taxpayers, the IRS has tiebreaker rules to determine eligibility for claiming the child. The tax system uses a progressive structure, impacting tax credits and benefits such as the earned income tax credit, which decreases as income increases.
Step-by-step explanation:
When an individual is a qualifying child for more than one taxpayer, the Internal Revenue Service (IRS) has tiebreaker rules to determine who can claim the child as a dependent. Generally, only one taxpayer can claim the child for tax benefits such as credits and exemptions.
If the situation arises where two taxpayers have an equal claim, criteria such as relationship to the child, the income of the parents or parties involved, whether one is a parent and the other is not, and if the child lived with one potential claimant more than the other during the tax year are considered. If parents are divorced, typically the parent with whom the child spent more time during the year has the right to claim the child as a dependent.
The tax system in the United States is progressive, meaning as an individual's income increases, they pay a higher amount and a larger fraction of their income in taxes. Certain tax benefits, like the earned income tax credit, are designed to help lower-income taxpayers and their qualifying children by providing a larger credit at lower income levels and gradually phasing out the benefit as income increases.