Claiming a dependent on your tax return can make all the difference when it comes to your tax liability. Adding a tax dependent may qualify you for certain tax benefits such as the child tax credit and child and dependent care credit, which in turn reduces your taxable income and your tax liability. It also allows you the opportunity to file using the more advantageous head of household filing status, if your alternative was to file as a single filer.
Before claiming someone as a dependent on your tax return, you have to make sure that the person meets all the Internal Revenue Service (IRS) requirements for a dependent.
- A taxpayer can claim a number of credits or deductions on their taxes if they have qualifying dependents.
- The most common dependents are children, but other dependent family members may also qualify.
- Tests in the Internal Revenue Code (IRC) establish a person's eligibility to be a taxpayer's dependent for tax purposes.
Who Is a Tax Dependent?
A dependent is generally defined as someone you take care of financially or otherwise. For tax purposes, not everyone you take care of qualifies as a dependent.
The IRS allows two types of tax dependents:
- Qualifying children
- Qualifying relatives
Claiming Children as Tax Dependents
The IRS has come up with a few rules to help you determine whether you have a qualifying child or relative. A dependent who is claimed as a qualifying child has to meet all six of the following tests:
- The Citizenship Test: Typically, a qualifying child must be a U.S. Citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. However, there are exceptions for adopted children who are not U.S. citizens but lived with you in your household the entire year.
- The Relationship Test: According to the IRS, the uniform definition of a child is a natural child, an adopted child, a stepchild, or an eligible foster child. A qualifying child can also be a sibling, a half-sibling, a stepsibling, or a descendant of any of the above (a grandchild or nephew, for example).
- The Residency Test: A qualifying child has to have the same residence as the taxpayer for more than half the year. There are exceptions for temporary absences. If a qualifying child is away from home because of school, vacation, custody arrangement, an illness, military duty, or business, that child will still meet the residency test.
- The Age Test: A qualifying child has to be either under the age of 19 or both under the age of 24 and a full-time student for at least five months of the year. There is no age limit for someone who is permanently and totally disabled. Unless the child is permanently and totally disabled, they also need to be younger than you (or your spouse if you file a joint return).
- The Support Test: The individual who is being claimed as a dependent must not have provided more than half of the cost of their own support. If you're trying to claim an individual who has a job and partially takes care of themselves, you have to make sure that you can prove that.
- The Joint Return Test: If a dependent is married and files a joint return with a spouse, the dependent does not count as a qualifying child. The only exception to this rule is if the dependent and the spouse are not required to file taxes and only do so to get a refund.
Qualifying Children Tests and Various Credits
The six tests above are the basic tests for a qualifying child, but, depending on the tax credit you're trying to claim, there are additional tests or modifications to the tests that must be met:
- Child and Dependent Care Credit: The individual claimed as a dependent must meet the six basic tests, but there is a modification to the age test. For the child and dependent care credit, the dependent must be under the age of 13, unless the individual is permanently or totally disabled. If parents are divorced, the custodial parent is the one eligible to take the child and dependent care credit, whether or not the noncustodial parent claims the child as a dependent on their tax return.
- Child Tax Credit: For 2021, the credit is $3600 for a child under age six and $3000 for children ages 6-17. The credit is fully refundable. For 2022, the credit decreases to $2000 per child up to age 16. A maximum of $1500 is refundable depending on income level; must have earned income of at least $2500 to be eligible.
- Earned Income Credit (EIC): A qualifying child for the EIC has to meet only four of the basic dependent tests: the relationship, residency, age, and joint return tests. In addition to meeting those four basic tests, the child must have lived with you in the U.S. for more than half the year.
Tie-Breaker Rules for Determining a Qualifying Child
If there is a situation in which a child qualifies as a qualifying child for two taxpayers, the following tie-breaker rules developed by the IRS should be used to determine which taxpayer claims the tax benefits:
- If only one taxpayer is the child's parent, the child will be the qualifying child of the parent.
- If both taxpayers are the child's parents and they do not file a joint return, the parent who can claim the child will be the parent with whom the child lived for the "longest period of time during the year."
- If the child lived with both parents for an equal amount of time, the parent with the highest adjusted gross income (AGI) can claim the tax benefits.
- If none of the taxpayers is the child's parent, the taxpayer with the highest AGI can claim the benefits.
Claiming Relatives as Tax Dependents
Some dependents don't fall into the category of a qualifying child but may meet other standards and tests set by the IRS, which enable you to qualify for certain tax credits. In addition to the joint return and citizenship tests, a qualifying relative has to meet the following four rules:
- Qualifying Child Test: To be a qualifying relative, the individual cannot be a qualifying child for anyone else. In other words, a dependent is only a qualifying relative if they do not meet the qualifying child tests for you or another taxpayer.
- Member of Household or Relationship Test: A qualifying relative can be a child or descendant of a child, a sibling, a stepsibling, a descendant of a sibling, a parent or stepparent, an ancestor of a parent (a grandparent, great-grandparent, etc.), an uncle or aunt, a father-in-law or mother-in-law. These relatives do not have to live with you. Alternatively, the qualifying person could be an individual who lives with the taxpayer for the entire year, regardless of whether the individual is related to the taxpayer, as long as the relationship between the taxpayer and the individual does not violate local law.
- Gross-Income Test: The dependent's income cannot be above a certain amount. For the 2021 tax year, that amount is $4,300. It rises to $4,400 in 2022.
- Support Test: For a dependent to be a qualifying relative, the taxpayer must have provided more than half of their support. Note the difference between the support test for a qualifying relative and a qualifying child. For a qualifying child, the taxpayer has to prove that the dependent (the child) provided half or less than half of their own support; for a qualifying relative, the taxpayer has to prove that the taxpayer provided more than half of the dependent's support.
For taxable years beginning in 2022, the standard deduction amount for an individual who may be claimed as a dependent by another taxpayer cannot exceed $1,150, or the sum of $400 and the individual's earned income, whichever is greater.
The Bottom Line
If your dependent-care situation is not straightforward, determining whether an individual is a qualifying child or relative can be confusing. If you can't determine whether a person qualifies as your dependent, contact the IRS at 1-800-829-1040 or call a local IRS office.