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7 Rules for Claiming Dependents on Taxes
Of all the different the complexities, terminology, and concepts involved in filing a personal income tax return, it’s the subject of “dependents” that confuses millions. However, when you dig into the issue, it’s not as mystifying as it initially seems.
Who Qualifies as a Dependent?
Under official IRS rules, qualifying dependents can take on any number of forms. But in order to claim someone as your dependent, that person must be a qualifying child, qualifying relative, a housekeeper, maid, or servant. But since very few people actually have the ability to claim housekeepers, maids, or servants as qualifying dependents, we’ll focus on the two major categories: children and relatives.
In order for a child to be qualify as a dependent, they must satisfy the following tests/requirements:
The child must be your daughter, son, foster child, stepchild, sister, brother, half-sister, half-brother, stepsister, stepbrother, or a direct descendant of any of these individuals.
The child must be (a) under the age of 19 at the end of the tax year and younger than you (or your spouse, if filing jointly); (b) under the age of 24 at the end of the year, a student, and younger than you (or your spouse, if filing jointly); or (c) any age if permanently and totally disabled.
The child can’t provide more than half of his or her own support over the course of the year.
The child can’t file a joint return for the year.
In order for a relative to qualify as a dependent, they must pass the following requirements:
The individual can’t be a qualifying child or qualifying child of any other taxpayer (per the test/requirements listed above).
The individual must either (a) be related to you, or (b) live with you for an entire year as a member of the household. (The following people qualify as relatives, even if they don’t live with you: child, foster child, stepchild, (or descendent of one of these individuals), sister, brother, half sibling, step sibling, mother, father, grandparent, stepmother, stepfather, niece, nephew, son or daughter of a half sibling, aunt, uncle, daughter-in-law, son-in-law, father-in-law, mother-in-law, sister-in-law, or brother-in-law.)
The individual’s gross income can’t exceed $4,150.
You have to provide at least 50 percent of the person’s total support for the year.
The Benefits of Claiming a Dependent
With so many rules and requirements to sort through, why claim someone as a dependent? Well, there are a few reasons why:
Increased standard deduction
Child Tax Credit of up to $2,000 per qualifying child
Additional Child Tax Credit that’s worth up to $1,400 per qualifying child
Credit for other dependents that’s worth up to $500 per qualifying individual
Ability to use the Earned Income Tax Credit
Ability to claim the Child and Dependent Care Credit for care expenses
Ability to claim medical expenses and other itemized deductions
In other words, claiming a dependent can mean the difference between owing the IRS thousands of dollars and receiving a refund.
7 Rules for Claiming Dependents on Your Tax Return
As you can tell, the IRS takes claiming a dependent seriously. If you plan to claim one or more dependents on your tax return this year, there are certain rules you must follow. While we’ve already touched on some of the information above, here’s a simple list of the information you really need to know:
The Child Must Be Part of Your Family
We’ve gone over all of the relationship tests above, but it’s really pretty simple. The individual needs to be a part of your immediate family, or a descendent of your immediate family.
The Child Must Be Under a Certain Age
Age limits have also been mentioned above. It’s basically 19 or younger at the end of the year, or 24 or younger (if the child is a student). If the child is over these age limits, but is permanently and/or totally disabled, they also qualify.
The Child Has to Live With You
The child needs to live in your home for at least six months out of the year. Though there are exceptions for things like hospital stays, college, or juvenile detention, six months is the basic rule of thumb.
In cases of divorce or separation, it’s the custodial parent who generally gets to claim the child as a dependent. If, however, there’s a written declaration, the noncustodial parent can claim the child as a dependent.
You Must Provide the Majority of the Child’s Support
You have to provide at least 50 percent of the child’s financial support in order to claim them as a dependent. In other words, it’s not enough for your biological child to be under the age of 19 and live in your home for 12 months out of the year. If the child’s grandparents provide 75 percent of the financial support, you can’t claim him as a dependent.
Someone Else Can’t Already Be Claiming the Child as a Dependent
An individual can only be claimed as a dependent one time by one individual (or a married couple filing jointly). If someone else is already legally claiming the child as a dependent, you can’t. This situation typically only comes up in situations of divorce or separation. However, it’s also in play when a married couple files separately. In this case, you and your spouse have to determine who claims the child.
Making Sense of Birth and Death
If a child is born during the year, but only lives in your house for part of the year, that child is considered to have lived with you for the entire year.
Likewise, if a child dies during the year, but only lives in the house for a few months, they’re considered to have lived in the house for the entirety of the calendar year.
Examples of Qualifying Relatives
The exact details on qualifying relatives have been discussed above. However, here are a few illustrations to bring some clarity to the issue:
Your adult daughter is 25 and single at the end of the year. She is unemployed and has lived with you all year. While she’s too old to qualify as a child, the fact that her income is below $4,200 and you provided more than half of her support makes her a qualifying relative.
Your boyfriend lived with you all year. His income was below the $4,200 threshold. While his parents provided some money for him, you provided roughly 70 percent of his financial support. Because he’s older than 19 and not a student, his parents can’t claim him as a dependent. This enables you to do so.
Significant other’s child.
Let’s say the same boyfriend in the previous example has a two-year old child who is not your biological child. The child has lived in your house for nine months out of the year. You provided all financial support. Because the boyfriend has no income, you can claim the child as your qualifying relative.
Let Taxfyle Help
Whether you’re an individual or a small business owner, Taxfyle can help you get connected with an experienced and licensed CPA professional to file your taxes. We’re a one-stop online tax service with a deep network of U.S. based CPAs and EAs who are ready and willing to assist you in any way they can.
For more information on how Taxfyle works, please feel free to contact us at your earliest convenience. We look forward to walking you through the process of stress-free, cost-effective income tax filing.
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