If you're helping out a financially stressed relative in this still-lousy economy, you may be entitled to some tax breaks. Here is the first instalment of our two-part series.

Claim Personal Exemption Deduction

The most obvious break is being able to claim the supported relative as your tax-return dependent, which allows you to bag a personal exemption deduction. For 2011, the deduction is $3,700. For 2012, it jumps to $3,800. You must meet the following requirements to collect the write-off.

Support Requirement

You must provide over half the relative's support for the year. If the person lives in your household for free, count his or her share of the rental value of your home as support as well as his or her share of total household expenses for food, utilities, and so forth. Figure the relative's share of these indirect costs by dividing them by the number of people in your household. Then add any amounts you spend on direct support -- such as covering the relative's health insurance premiums or car payments. Calculating support can be tricky. For full details, see IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information) at www.irs.gov.

Importantly, the supported person need not live in your household if he or she is your child; a descendant of your child (such as a grandkid); a brother, stepbrother, half-brother, sister, stepsister, half-sister or a descendent of one of these individuals (such as a niece or nephew); or your son-in-law, daughter-in-law, father, stepfather, father-in-law, mother, stepmother, mother-in-law, brother-in-law, sister-in-law, aunt, or uncle. If you're supporting someone who doesn't fit into any of these relationships, that person can't be claimed as your dependent unless his or her main residence is your household. For example, even though you provide 100% support for a godchild, he or she can't be your tax-return dependent unless you share the same household.

Gross Income Requirement

The supported relative's gross income must be under the annual threshold for you to claim a personal exemption deduction for that person on your Form 1040. The threshold for 2011 is $3,700; it's $3,800 for 2012. Helpfully, gross income for this purpose does not include tax-free Social Security benefits.

Note: If the relative in question is your under-age-19 child, the gross income requirement doesn't apply. Ditto for your under-age-24 child who is a full-time student. In other words, a supported child who fits one of these descriptions can be your dependent regardless of the child's gross income.

No Joint Return Requirement

The supported person cannot file a joint Form 1040 with his or her spouse unless the return was only filed to collect a tax refund and neither spouse would have owed tax if they had filed separate returns.

Citizen or Resident Requirement

The supported person must be a U.S. citizen, a U.S. resident alien, a U.S. national, or a resident of Canada or Mexico.

Claim Personal Exemption Deduction under Multiple Support Agreement

Say you have a relative who would qualify as your dependent under the preceding rules except for one thing: you don't provide over half of his or her support. Instead you and one or more other sainted individuals together provide over half of the support. This is a relatively common scenario with an aged parent or disabled adult sibling. But it could also happen with just about any out-of-work relative these days. Thankfully, you can potentially claim the personal exemption deduction ($3,700 for 2011; $3,800 for 2012) in this situation under the so-called multiple support agreement rules. You must meet the following requirements.

* You and one or more other sainted individuals together pay over half of the relative's support, but no one individual pays over half.

* You pay over 10% of the relative's support.

* You file Form 2120 (Multiple Support Declaration) with your Form 1040.

* On Form 2120, you identify any other individuals who paid over 10% of the relative's support. You must also list their addresses and Social Security numbers and certify that you have their written permission to claim the deduction for the jointly supported relative. (You can't split the deduction.)