While every American who earns an income has to pay taxes, many taxpayers can reduce how much tax they owe by claiming deductions and credits. To claim a dependent might be a great way to lower your tax burden if you have provided more than half of the person’s financial support for the tax year. However, it is important to note that not everyone you support qualified as a dependent. With that in mind, let’s look at some of the IRS rules about dependents.
Definition: According to IRS publication 501 (2020), the term “dependent” means: a qualifying child or a qualifying relative. However, you will want to make notes of the exceptions below, you can’t claim:
- Any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer.
- A married person who files a joint return as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid.
- A person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.
- A person as a dependent unless that person is your qualifying child or qualifying relative.
Who is considered a Qualifying Child?
The following tests must be met to be considered a Qualifying Child:
- Relationship: The child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.
- Age: The child must be:
- Under the age of 19 at the end of the year and younger than you or your spouse if filing jointly.
- A student under the age of 24 at the end of the year and younger than you or your spouse if filing jointly.
- Permanently and totally disabled at any time during the year regardless of age.
- Residency: The child must have lived with you for more than half the year. There are exceptions when one of you or both, are temporarily absent due to special circumstances such as illness, education, business, vacation, military service or detention in a juvenile facility.
- Support: To meet this test, the child can’t have provided more than half of his or her own support for the year. Scholarship or support provided by the state (welfare, food, housing).
- Joint return: To meet this test, the child can’t file a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid).
- You can’t claim a person as a dependent unless that person is your qualifying child or qualifying relative.
Who is considered a Qualifying Relative?
The following tests must be met to be considered a Qualifying Relative:
- The person can’t be your qualifying child or the qualifying child of any other taxpayer.
- The person either (a) must be related to you in one of the ways listed under Relatives who don’t have to live with you, or (b) must live with you all year as a member of your household (and your relationship must not violate local law).
- The person needed gross income for the year must be less than $4,300.
- You must provide more than half of the person’s total support for the year. There are exceptions for multiple support agreements, children of divorced or separated parents (or parents who live apart).
The IRS understands that some taxpayers provide their children and relatives with financial support. That is why the government offers individuals with dependents the opportunity to reduce their tax burden. It can be complicated to determine who can claim a qualified child or relative when the person can be claimed by more than one person, but the information above provides a simple overview of the IRS rules regarding dependents.
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