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Your children are out of the house and you're enjoying the empty nest. But the youngest, who is away at college, will be back over summer break. Can you claim her as a dependent? Most likely you can, but dependents must meet certain tests — not academic, but IRS, tests — to qualify as exemptions on your tax return.
Dependent claims aren't limited to children. An adult relative could qualify as a taxpayer's dependent as long as he or she meets certain IRS conditions.
Dependence tests that must be met by …
- Joint return
- Not a qualifying child
- Relationship/household member
- Gross income
- Joint return
Making sure the requirements are met is critical, because claiming dependents on taxes can help reduce your bill. In many cases, you can claim certain tax-cutting deductions and credits related to a dependent. The key tax breaks associated with a child are the child tax credit, the child and dependent care credit and the earned income tax credit.
Even if these added tax credits don't apply to your situation, a dependent named on your return can still trim your taxes. Each dependent directly translates into an exemption, a specific dollar amount, adjusted annually for inflation, that you deduct from your adjusted gross income, or AGI. For 2016 and 2017 tax purposes, an exemption is worth $4,050.
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Child dependent tests
In order to claim a child as your dependent, the youngster must now meet four key tests:
- Relationship test: The child must be your child, either by birth, adoption or by being placed in your home as a foster child. Even if the adoption isn't yet final, if the child is living with you and the process is underway, it counts. A dependent child can also be your brother, sister, stepbrother, stepsister or a descendant of one of these relatives.
- Residency test: The child must live with you for more than half of the year. If the youth is away temporarily for special circumstances, such as for school, vacation, medical treatment, military service or detention in a juvenile facility, these particular absences still count as time lived at home. A child who was born or died during the year is considered to have lived with you for the entire year if your home was the child's home for the entire time he or she was alive during the year.
- Age test: A child must be under a certain age depending on the particular tax benefit. For the dependency exemption, the child must be younger than 19 at the end of the year. However, a youth who was a student at the end of the year can be claimed as long as he or she is younger than 24. There is no age limit if the individual is permanently and totally disabled.
- Support test: This refers to the youngster's contributions, not those of adults in the family. To qualify as a dependent, the child cannot provide more than half of his or her own support during the year.
The support issue usually is not a problem. However, if the child is a successful model, for example, he or she could bring in substantial income and therefore might not be able to be claimed as a dependent under this test. Even then, as long as the parents provide more than the youngster is bringing in, then the child would still qualify.
Even after the child meets the four qualifying tests, there are two other considerations before he or she can be claimed as a dependent for exemption purposes.
The youngster generally must also be a U.S. citizen, U.S. national or a resident of the United States, Canada or Mexico. An exception applies for certain adopted children.
And if married, the child cannot file a joint return unless the return is filed only as a claim for refund and no tax liability would exist for either spouse if they had filed separate returns.
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Other dependent relatives
Other relatives also might be your tax dependent if they meet similar qualifying tests.
The first requirement is, obviously, that the person not be your qualifying child for tax purposes. The person also cannot be considered the dependent child of anyone else.
The person must live with you for the full tax year or be related to you. A person who is not related to you, but lives in your home for the required amount of time and meets the other tests also could be considered by Uncle Sam to be a relative for tax-dependency claims. So yes, it might be possible to claim your unemployed live-in boyfriend or girlfriend on your taxes.
Relatives who do not have to reside in your home but who can be claimed as tax dependents include parents, siblings, grandparents, nieces and nephews, aunts and uncles and in-laws.
Your dependent relative must earn less than the personal exemption amount during the year, and he or she must get more than half of his or her total support for the year from you.
Qualifying relatives also must meet the same citizenship and joint tax-filing requirements as do qualifying children.
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Sometimes a child can be the qualifying child of more than one person. However, because the IRS allows only one taxpayer to claim the same youngster, all eligible taxpayers must decide who will claim the child and any ensuing tax benefits.
If you can't agree and both of you list the youth on separate returns, expect the IRS to disallow one or more of the claims using tiebreaker rules.
- First, the agency looks at whether only one person is the child's parent. This would be the case, for example, if one credit claimant is a stepparent. The parent would get the credit.
- If both taxpayers are the child's parents, then the parent with whom the child lived the longest during the tax year would be allowed the credit. If the child lived with both separated parents for an identical amount of time, the credit would go to the parent with the highest AGI.
- Finally, if neither person is the child's parent, the IRS would then allow the credit to go to the filer with the highest eligible AGI.
If several children are involved in a family situation where two taxpayers may claim them, the adults can decide to share the children for tax purposes. For example, you and your three children live with your mother. You can claim one child as a dependent and your mother can claim the other two. Again, if such a sharing agreement cannot be reached, the tiebreaker rules would come into play.
Final exemption factors
A spouse is never considered a dependent. However, you can claim an exemption for your husband or wife as long as you file a joint return.
You also are allowed an exemption deduction for yourself. But if you file a return while being claimed as a dependent on someone else's 1040, the IRS warns that you won't be able to claim a personal exemption on your own return.
Details and relationship dependency examples are available in IRS Publication 501, Exemptions, Standard Deduction and Filing Information.