Who is a tax dependent?
A tax dependent is a relative or child whose characteristics and relationship with you allow you to claim certain credits and tax deductions, such as head of household status, child tax credit, or the child and dependent care credit.
Determining if someone is tax dependent can be difficult. Here's a summary, but keep in mind that this is a complex tax code area, and there are exceptions to every rule. For more details, talk to a tax professional.
Who qualifies as a tax dependent?
From a tax point of view, there are two categories of dependents:
A qualifying child.
A qualifying relative
A Qualifying Child
To declare a dependent child on your tax return, the child must meet all of the following conditions.
The child must be part of your family.
This is the relationship test. The child must be your son, daughter, son-in-law, adopted child, brother, sister, half-brother, half-sister, half-brother, half-sister, or a descendant of any of these persons.
The child must be under a certain age.
It's proof of age or age test. One of these things must be true to pass this test:
At the end of the year, the child was 18 or younger and is younger than you or your spouse (if married, filing jointly).
At the end of the year, the child was 23 or younger, was a student, and was younger than you or your spouse (if married, filing jointly). "Student" in this case means that the child has been a full-time student for at least five months of the year.
The child exceeds these age limits but has a permanent and total incapacity certified by the doctor.
The child must live with you.
It is a proof of residence or residency test. The child must have lived with you for more than half of the tax year. There are a few exceptions for temporary absences (such as if the child is in college, hospital, or juvenile prison), children born or died within the fiscal year, children of divorced parents or separated, and abducted children.
In the event of a separation or divorce, the custodial parent generally claims the dependent child. However, the non-custodial parent can sometimes claim child support if the custodial parent signs a written statement that they will not be seeking child support.
The child cannot provide more than half of his or her financial support.
If your child gets a job and offers at least half of their financial support, you will not be able to claim your child as a tax dependent. However, support often includes household expenses such as rent, food, utilities, clothing, unpaid medical bills, travel, and entertainment expenses.
The child cannot file a joint tax return with anyone
This is proof of the joint return test. There is an exception here if the child and the child's spouse file a joint return only to claim a refund of withholding tax or estimated tax paid.
The child must have a certain residency or citizenship status.
It is the citizen or resident test. The child must be a U.S. citizen, U.S. resident alien, U.S. national, or resident of Canada or Mexico.
Qualifying Relative
A qualifying relative can be of any age. But to claim a dependent relative for tax on your tax return, the person must meet all of the following conditions.
The person cannot be another person's qualifying child
You cannot claim someone else's qualifying child as a qualifying relative. So if your child lives with your parents, for example, and passes all the tests to be your eligible child, you can't even declare that child as an eligible relative.
The person must be related to you or live with you
Only one of two things must be true:
The person has one of these relationships with you. The persona is your son, son-in-law, legally adopted son, adopted son, or descendant of such a person (for example, your nephew), or is it your brother, half-brother, half-brother, nephew, or niece (including kids of your half-siblings), or is your father or grandfather, stepfather, aunt or uncle or in-law(but not your foster parents).
The person has lived with you all year. There are some exceptions for temporary absences (such as if the child was in college), children born or died during the year, kids of separated or divorced parents, and abducted children.
Keep in mind that only one of these two things must be true to overcome the hurdle. This means that someone related to you does not have to live with you for them to qualify as a dependent. This can be especially vital for people supporting elderly relatives who live elsewhere.
The person's gross income is below the threshold.
A person's gross income for the year cannot exceed $4,300 for the 2021 fiscal year. Persons with disabilities or sheltered workshops get an exception. Gross income includes rental properties, business income, taxable unemployment, and social security benefits.
You must provide more than half of your total financial support for the year.
Support typically includes household expenses such as rent, food, utilities, clothing, unpaid medical bills, travel, and recreation expenses. Suppose more than one person is supporting a person and, therefore, no person is providing more than 50% of the support. In that case, the support providers can sign a declaration of multiple support designating who can claim the supported person as their dependent.
Who is not a tax dependent?
These people are generally not considered tax dependents:
Anyone at all, if someone else declares them as a dependent (in other words, you generally cannot depend on someone and then declare yourself a dependent).
Anyone who is not a US national, US resident alien, US citizen, or resident of Mexico or Canada (there are exceptions here for people who adopt children).
Foreign exchange student.
The people who work for you.
Usually, a married person filing a joint tax return (there are important but difficult exceptions to this – talk to a tax expert).
Tax exemptions for claiming a tax dependent
Claiming a dependent can bring you great tax benefits.
Adoption Credit: covers adoption costs up to $14,400 per child in 2021.
Child and dependent care tax credit: For the 2021 tax year, it is up to 50% of up to $8,000 in child care and similar expenses for a child under age 13, a spouse, or a relative who cannot care for themselves or another dependent so you can work and up to $16,000 in expenses for two or more dependents.
Child tax credit and credit for other dependants: You can earn up to $3,600 per child in 2021.
Earned Income Credit: This credit offers you between $1,502 and $6,728 in 2021, depending on the number of children you have, your filing status, and how much you earn. It's worth exploring if your adjusted gross income is below $57,000.
Head of household (HOH) Filing Status: This filing status gives you higher tax deductions and more favorable tax categories than when you file as an individual.
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