What Is the Joint Return Test?
According to the IRS: "You generally can't claim a married person as a dependent if filing a joint return."
The joint return test stipulates that no dependent can file a joint return with a spouse and still be claimed as a dependent on someone else's return, such as that of a parent or guardian. There is, however, an exception to this rule.
Because claiming dependents is valuable, the IRS institutes several tests, such as the joint return test, to make sure that dependents aren’t being double-counted.
- When deciding if someone who has lived in your house that you have supported and who has not made any money is a dependent, you must apply the joint return test.
- In most cases, you can't claim someone as a dependent who is filing a joint tax return with someone else (usually a spouse).
- One exception is if neither the person you claim as a dependent nor their spouse made enough income to be taxable, but they filed a return to get reimbursed for wages withheld.
Understanding the Joint Return Test
According to the joint return test, a taxpayer filing a joint return can be claimed as a dependent under only one condition: "that person and their spouse file the joint return only to claim a refund of income tax withheld or estimated tax paid."
A taxpayer may not count someone who is married and files their return with their spouse as a dependent, even if that person makes no money during the tax year and lives in the taxpayer's house if their spouse made taxable income reported on their joint return.
The IRS gives the following example: "You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. He earned $25,000 for the year. The couple files a joint return. You can't claim your daughter as a dependent."
Another example: "Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. They lived with you all year. Neither is required to file a tax return. They don't have a child. No taxes were taken out of your son's pay or his wife's pay. However, they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount."
"Because claiming the American opportunity credit is their reason for filing the return, they aren't filing it only to get a refund of income tax withheld or estimated tax paid. The exception to the joint return test doesn't apply, so you can't claim either of them as a dependent."
Joint Return Test for Claiming Dependents
The modern income tax was first introduced in 1913, and a deduction for dependents was added to the tax code four years later.
That Congress has supported a deduction for dependents for so long is a reflection of its desire to support the option to have a large family, while still maintaining the overall progressivity of the federal income tax regime. The original income tax was quite progressive, with only about the top 1% of incomes taxed. But with that progressivity came a bias against large families, which generally require more income to support.
Congress has continued to support deductions for dependents ever since and made claiming dependents even more lucrative for some taxpayers with its 2018 tax reform legislation.
Starting in 2018, taxpayers who can claim a dependent under the age of 17 will receive a tax credit of $2,000 per child, up from $1,000 previously. Further, Congress raised the income level at which the credit phases out. The credit now begins to phase out at $400,000 of income for married couples and $200,000 for singles, compared with 2017 levels of $110,000 for married couples and $75,000 for singles. This benefit is a particularly valuable part of the tax code for many filers because the child tax credit is a dollar-for-dollar reduction of tax liability, rather than a deduction, which lowers taxable income.
Note that as a result of the American Rescue Plan of 2021, signed into law by President Biden, the limit on the Child Tax Credit, previously $2,000, has been raised to $3,000 for children ages six through 17 and $3,600 for children under six. The credit is also now fully refundable; previously, only $1,400 was refundable. These changes are part of the American Relief 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 singles with incomes above $75,000 and couples with incomes above $150,000.