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In one of our previous newsletters, we summarized everything you needed to know about the child and dependent care credit. Well, not quite so, since, as we mentioned there, determining who qualifies as a dependent needs to be explored in a separate article. So, here we are.
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The IRS rules for qualifying dependents for tax purposes cover just about every conceivable situation, from housekeepers to emancipated offspring. Without going into details for the myriad of particular situations, you can find below the most important rules to help you determine who you can claim as a dependent on your tax return.
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- There are five tests that can help you to determine if a child qualifies as your dependent.
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1. The Relationship Test. To meet this test, a child must be:
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- Your son, daughter, stepchild, foster child, or a descendant (for example, your grandchild) of any of them, or
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- Your brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, your niece or nephew) of any of them.
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2. The Age Test. According to this test, a child must be:
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- Under age 19 at the end of the year and younger than you (or your spouse, if filing jointly),
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- A student under age 24 at the end of the year and younger than you (or your spouse, if filing jointly), or
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- Permanently and totally disabled at any time during the year, regardless of age.
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3. The Residency Test. To meet this test, your child must have lived with you for more than half the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents.
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| 4. The Support Test. To meet this test, the child cannot have provided more than half of his or her own support for the year. (This test is different from the support test to be a qualifying relative, which is mentioned later.) |
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| 5. The Joint Return Test. To meet this test, the child cannot file a joint return for the year. |
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| Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child to take all of the possible tax benefits (provided the person is eligible for each benefit). |
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| There are tiebreaker rules to determine which person can treat the child as a qualifying child to claim six possible tax benefits: the exemption for the child, the child tax credit, head of household filing status, the credit for child and dependent care expenses, the exclusion from income for dependent care benefits, and the earned income credit. |
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There are four tests that must be met for a person to be your qualifying relative.
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1. Not a Qualifying Child Test. A child isn't your qualifying relative if the child is your qualifying child or the qualifying child of any other taxpayer.
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| 2. Member of Household or Relationship Test. To meet this test, a person must either: |
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- Live with you all year as a member of your household, or
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- Be related to you in one of the following ways: your child, stepchild, foster child, or a descendant of any of them; your brother, sister, half brother, half sister, stepbrother, or stepsister; your father, mother, grandparent, or other direct ancestor, but not foster parent; your stepfather or stepmother; a son or daughter of your brother or sister; a son or daughter of your half brother or half sister; a brother or sister of your father or mother; your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
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3. Gross Income Test. To meet this test, a person's gross income for the year must be less than $4,000. (Gross income is all income in the form of money, property, and services that isn't exempt from tax.)
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| 4. Support Test. To meet this test, you generally must provide more than half of a person's total support during the calendar year. You figure whether you have provided more than half of a person's total support by comparing the amount you contributed to that person's support with the entire amount of support that person received from all sources. This includes support the person provided from his or her own funds. |
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| Determining who qualifies as a dependent on your tax return is important not just to claim the dependent care credit, it can also qualify you for other tax credits, such as the child tax credit and the earned-income tax credit. In addition, these rules help you determine if you can write off dependent daycare expenses, medical expenses, various itemized deductions and most tax credits that involve children or family issues. Qualifying for these benefits can make the difference between owing money and receiving a refund. |
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| As always, we feel it is our duty to advise you to look for support and council from a tax professional in all your dealings with the IRS. |
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