What Is the Gross-Income Test?

The gross-income test is one of the five necessary tests that dependents must pass before they can be claimed as such in the United States.

The gross-income test mandates that dependents cannot earn more than a certain amount of income each year. Furthermore, this test only applies to potential dependents that are over the age of 18 or over the age of 23 if the candidate in question is a full-time student.

Understanding the Gross-Income Test

The amount that a potential-dependent can earn is indexed for inflation each year and consequently fluctuates periodically. For 2019, for example, the limit was $4,200. This is a spike from the 2015 threshold of $4,000, and the 2008 limit of $3,500. Because of periodically shifting numbers, it's vital for individuals to make certain they base the test on the correct, up-to-date figure, before moving on the other four dependency tests. If an individual fails the Gross Income Test or any of the other qualifying relative dependent metrics, they may not claim that dependent for purposes of the personal exemption. And in order to claim a dependency exemption for a qualifying child, a series of qualifying child dependency tests must be met. There's no age limit for a qualifying relative, and if you are entitled to claim an exemption for a dependent, said dependent might not claim a personal exemption on their own tax return.

Income Considered Valid for Gross Income Consideration

Gross income of a qualifying relative that may be deemed a dependent takes into consideration the totality of an individual’s combined income sources, which may be the form of money, and non-tax-exempt property and services. The terms for calculating income from merchandising, mining, or manufacturing endeavors are extremely specific. Namely, gross income is viewed as total net sales, less the cost of goods sold, plus any miscellaneous business income. Gross receipts from rental properties are deemed gross income. Other gross income includes any business partners’ share of the gross partnership income, but not a share of the net profits. Gross income furthermore includes all taxable social security benefits, taxable unemployment compensation, and certain fellowship grants and scholarships an employer provides.

Finally, if a household member pays legally obligated child support to a child outside the home, the child support is not counted in the initial gross income test. And there are no gross income tests for households that include an elder or disabled member.