Claiming a dependent is a great way to save some cash on your taxes, though you need to be sure that the person you claim actually qualifies as a dependent. There are several rules for claiming dependents on your tax returns, including requirements for qualifying children or relatives.
The following information will help you determine which members of your family can be considered a dependent when you file your tax return.
Benefits of Claiming Dependents
Taxpayers with family in their household should be aware of the opportunity to claim family members as dependents, as doing so can save you thousands on your tax return. In 2016, each qualified dependent reduces your taxable income by $4,050 – a significant savings.
The rules for dependents apply to other aspects of tax filing, including certain credits. There are several credits offered only to taxpayers with dependents, such as the child tax credit and the earned-income tax credit.
The same rules are also used to determine some of your expense deductions that relate to children or family costs, such as medical fees or child care. These credits and deductions can make the difference between owing taxes and getting a refund.
Who Is a Dependent?
While the rules are straightforward, some situations may complicate things. Children enrolled in college full-time, or a relative who spends a few months with you, even a child with a part time job can leave you wondering if you can claim them as a dependent.
In many cases, most taxpayers will be covered by the simple rules of who can be claimed as a dependent. There are two classifications of dependents: Qualifying Child and Qualifying Relative. Each has their own unique rules, however both require:
- The person must be a U.S. Citizen, national, or resident, or a resident of either Canada or Mexico. Taxpayers can only claim foreign exchange students as dependents if the student meets this requirement.
- You must be the only person claiming the relative or child as a dependent. That person can’t claim a personal exemption for themselves or claim their own dependent.
- They must not file a joint return with their spouse, if married. Even if you support your teenaged child, if he/she is married and files a joint return with their spouse, they become ineligible to be your dependent.
Along with meeting the above requirements, a qualifying child has to be:
- Related to you as you son, daughter, stepchild, foster child, brother, sister, half-sibling, step-sibling, adopted child or any of their offspring.
- Under the age of 19 (full-time students under age 24). The age limit is waived if the child is permanently and totally disabled.
- Living with you for over half the year, provided no exceptions apply.
- Supported by you, even if they have a job (which cannot provide more than 50% of their support)
- Claimed by just you as a dependent. If you are divorced, there are tie-breaker rules used by the IRS to determine which parent can claim the child, using income, custody, and residency factors.
In many situations, taxpayers provide support to their aged parents. However, simply sending money occasionally to your parents doesn’t mean you can claim them as a dependent. A relative qualifies as a dependent if:
- They live in your residence for the entire year, or are considered exempt from residency rules as one of about 30 types of relatives determined by the IRS.
- They make less than $4,050 in the tax year.
- At least half of their support is provided by you.
- You are the only person who claims them. You can’t claim the same person as both a qualifying child AND a qualifying relative. You’re also not able to claim a relative, such as a grandchild, if they are claimed by their parent.