What Is a Dependent?
A dependent is a qualifying person other than the taxpayer or their spouse who entitles a taxpayer to claim a dependency exemption on their tax return. A taxpayer who can demonstrate that they have a dependent also may be able to use this filing status to qualify for certain tax credits.
Tests in the Internal Revenue Code (IRC) establish a person’s eligibility to be a taxpayer’s dependent for the purpose of dependency claims.
- A dependent is a qualifying person other than the taxpayer or their spouse who entitles a taxpayer to claim a dependency exemption on their tax return.
- A taxpayer who can demonstrate that they have a dependent also may be able to use this filing status to qualify for certain tax credits.
- A dependent may be a qualifying child or other qualifying relative.
Understanding a Dependent
A dependent may be a qualifying child or other qualifying relative. Dependency status is determined by IRC tests. To qualify for dependent status, three tests must be met for all dependents: the dependent taxpayer test, the joint return test, and the citizen or resident test. Any person who may be claimed as a dependent by another taxpayer may not claim anyone as a dependent on their own tax return.
Any person who filed a joint return (as a married person) cannot claim anyone as a dependent on their tax return. Finally, to be claimed as a dependent, a person must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.
Only one taxpayer may claim a given dependent on their income tax return, which is particularly crucial in cases of dual custodial parents. Dependency claims of separated or divorced parents are resolved in favor of the custodial parent. In some cases, previously determined court decrees or a written declaration by the custodial parent may release the claim to the noncustodial parent.
Types of Dependents
Certain tests are used specifically to determine if a dependent is a qualifying child or a qualifying relative. To meet the IRC relationship test—and be considered a qualifying child—the child must be:
- The taxpayer’s son, daughter, stepchild, foster child (placed by an authorized placement agency), or a descendant (for example, a grandchild) of any of them
- The taxpayer’s brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, niece or nephew) of any of them
To meet the IRC age test, the child must be:
- Under age 19 at the end of the tax year and younger than the taxpayer (or the taxpayer’s spouse, if filing jointly)
- A full-time student under the age of 24 at the end of the year and younger than the taxpayer (or spouse, if filing jointly)
The final tests to determine if the individual qualifies as a qualifying child are the resident test and the support test. To meet the resident test, the child must have lived with the taxpayer for more than half of the year. However, there are exceptions to this rule. For example, if the child or the taxpayer is temporarily absent due to illness, education, business, vacation, military service, institutionalized care for a child who is permanently and totally disabled, or incarceration, then the child is still considered part of the residence (living with the taxpayer) during this time.
The support test requires that the child cannot have provided more than half of their own financial support during the tax year.
You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. This treatment applies for all years until the year when there is a determination that the child is dead, or the year when the child would have reached age 18 (whichever is earlier).
If these tests are not met, then the taxpayer may decide to see if the tests for a qualifying relative are met. These tests are slightly different and are applied only when the tests for a qualifying child are not met. Unlike a qualifying child, a qualifying relative can be any age.
A qualifying relative must meet the “not a qualifying child” test, the member of household or relationship test, the gross income test, and the support test. A child cannot be a taxpayer’s qualifying relative if the child is the taxpayer’s qualifying child (or is the qualifying child of any other taxpayer).
To meet the member of household or relationship test, the person either must live as a member of the taxpayer’s household all year or be related to the taxpayer. It is important to note that an adopted child is treated the same as a natural child and that any of these relationships that were established by marriage are not ended by death or divorce.
To meet the gross income test, the dependent’s gross income for the tax year must be less than the threshold amount. This amount changes every year, but for the 2020 tax year, the amount is $4,300.
Finally, to meet the support test, the taxpayer must have provided more than 50% of the person’s total support for the tax year. (This support test should be differentiated from the one for a qualifying child, which tests whether the child provided more than half of their own support for the year.)
The deduction for personal and dependency exemptions is suspended for tax years 2018 through 2025 by the Tax Cuts and Jobs Act (TCJA), which was signed into law in 2017 by then-President Donald Trump. Although the exemption amount is zero, the ability to claim a dependent may make taxpayers eligible for other tax benefits.
Tax Credits for Dependents
If the IRC tests determine that you a dependent, then you may be eligible for certain tax credits and deductions.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit that a taxpayer receives depends on their income and their number of children.
As a result of the American Rescue Plan Act of 2021, the EITC—originally capped at $543 for childless households—increases for those same households in 2021 to $1,500.
Child Tax Credit (CTC)
Taxpayers can claim a Child Tax Credit (CTC) of up to $2,000 for each child under age 17. For single parents, the credit is reduced by 5% of adjusted gross income (AGI) over $200,000 ($400,000 for married couples). If the credit exceeds the total taxes owed, then taxpayers can receive up to $1,400 of the balance as a refund, known as the Additional Child Tax Credit (ACTC) or refundable CTC.
Note that as a result of the American Rescue Plan Act of 2021, signed into law by President Biden, the limit on the Child Tax Credit (CTC), previously $2,000, has been raised to $3,000 for children ages 6 through 17 and $3,600 for children younger than 6. The credit also is now fully refundable; previously, only $1,400 was refundable. These changes are part of the American Rescue Plan Act of 2021 and are effective only for the 2021 tax year, unless extended by an additional act of Congress. It is phased out for single people with incomes above $75,000 and couples with incomes above $150,000.
Child and Dependent Care Credit
You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work. The amount that you receive is a percentage of the amount of work-related expenses that you paid to a provider for the care of a qualifying individual, and the percentage depends on your AGI.
Originally capped at 35% of eligible expenses up to $2,100, the credit is now capped at 50% of eligible expenses up to $4,000 for one qualifying individual and $8,000 for two or more qualifying individuals. The bill also makes the credit entirely refundable.
The two education credits are the American opportunity tax credit (AOTC) and the lifetime learning credit (LLC). If the taxpayer has a dependent who attends a higher education institution, then the taxpayer will be eligible to claim the education credits associated with the dependent.
The AOTC is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. The LLC is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution.