Financial Terms / C - D / Dependent

Dependent

A dependent is someone who relies on you for financial support. This person can be your child, relative, or even someone not directly related to you, like a domestic partner. For tax purposes, the IRS defines a dependent as someone "other than the taxpayer or spouse" who qualifies to be claimed on someone else's tax return.

There are two types of dependents:

1. Qualifying Child: Must be under 19 (or 24 if a full-time student) or any age if permanently disabled.

2. Qualifying Relative: Can be any age but must meet specific criteria.

To claim a dependent, they must pass certain tests:

• Citizenship: Must be a U.S. citizen, resident alien, national, or resident of Canada or Mexico.

• Filing Status: Can't file a joint return (with some exceptions) or be claimed on another tax return.

• Support: You must provide more than half of their financial support.

Claiming dependents can lead to significant tax benefits. It may lower your taxable income and make you eligible for credits like the Child Tax Credit or Earned Income Tax Credit. The exact amount saved depends on your tax bracket and the number of dependents claimed.

Remember, the rules for claiming dependents can be complex. It's crucial to stay updated with the latest IRS guidelines to ensure you're following the correct procedures.

Qualifying Child Criteria

To claim a child as a dependent, they must meet specific criteria set by the IRS. Here are the key tests a child must pass to be considered a qualifying child:

Relationship Test

The child must be your son, daughter, stepchild, foster child, brother, sister, half-sibling, or a descendant of any of these. Adopted children are treated the same as biological children.

Age Test

Your child must be:

• Under 19 at the end of the tax year and younger than you (or your spouse if filing jointly)

• Under 24 if a full-time student

• Any age if permanently and totally disabled

Residency Test

The child must live with you for more than half the year. Temporary absences for school, illness, or vacation are exceptions.

Support Test

The child can't provide more than half of their own support during the year.

Joint Return Test

The child can't file a joint return, except to claim a refund of withheld taxes.

Remember, these tests must be met each tax year you want to claim the child as a dependent.

Qualifying Relative Criteria

To claim someone as a qualifying relative, you need to meet specific IRS criteria. Unlike a qualifying child, a qualifying relative can be any age. Here are the key tests:

Relationship Test

The person must be related to you or live with you all year as a household member. Relatives who don't have to live with you include children, siblings, parents, and certain in-laws.

Income Test

Your relative's gross income must be less than $4,300 for the tax year. This doesn't include tax-exempt income like certain Social Security benefits.

Support Test

You must provide more than half of the person's total support for the year. This includes food, housing, clothing, medical care, and other necessities.

Not a Qualifying Child

The person can't be your qualifying child or anyone else's qualifying child.

Remember, all these tests must be met to claim someone as a qualifying relative. If you're unsure, check the latest IRS guidelines or consult a tax professional.

Tax Benefits for Claiming Dependents

Claiming dependents on your tax return can lead to significant tax benefits. The Child Tax Credit (CTC) offers up to $2,000 per qualifying child for the 2024 tax year. This credit starts to phase out when your modified adjusted gross income exceeds $200,000 ($400,000 for joint returns). The Earned Income Tax Credit (EITC) helps lower-income taxpayers reduce their tax burden. The amount increases with each child, up to three children.

The Child and Dependent Care Credit provides relief for working parents. In 2024, you can claim up to $3,000 of eligible expenses for one dependent or $6,000 for two or more. The credit maxes out at $1,050 for one dependent and $2,100 for two or more.

For college students, the American Opportunity Tax Credit (AOTC) offers up to $2,500 per eligible student for the first four years of higher education. If your tax bill reaches zero, you can get a refund of up to $1,000.

FAQs

What criteria must be met to claim someone as a dependent under IRS rules?

To claim someone as a dependent, they must either be a qualifying child or a qualifying relative. For a qualifying child, the criteria include:

• Relationship: The individual must be your child, stepchild, foster child, sibling, stepsibling, or a descendant of any of these.

• Age: They must be under 19 years old, or under 24 if a full-time student, or any age if permanently and totally disabled.

Until what age can my child be claimed as a dependent?

Your child can be claimed as a dependent if they are younger than you or your spouse (if filing jointly) and either under 19 years old, or under 24 years old if they are a student, as of the end of the calendar year.

What is the income limit for a dependent to still be eligible for claim?

For the year 2024, a dependent can be claimed if they have a gross income of less than USD 5,050.00. This limit was USD 4,700.00 for the year 2023. It's important to note that some types of income, like certain Social Security benefits, may be excluded from this gross income calculation.

Who is ineligible to be claimed as a dependent?

You cannot claim your spouse as a dependent. Typically, dependents include your children, stepchildren, siblings, stepsiblings, or parents if they meet specific qualifying child or relative criteria.