Whether filling out your new hire paperwork or preparing your tax returns, the IRS has guidelines for who may be claimed as a dependent for income tax purposes.
There are typically two types of dependents for federal income tax purposes:
- A qualifying child; and
- A qualifying relative.
In order to claim either type of dependent, you must satisfy the following tests:
- Dependent Taxpayer Test – You cannot claim any dependents if you (or your spouse, if filing jointly) could be claimed as a dependent by another taxpayer;
- Joint Return Test – You cannot claim a married person who files a joint return as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid; and
- Citizen or Resident Test – You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.
In addition to the above, a qualifying child must satisfy the following tests in order to be claimed as your dependent:
- Relationship Test – The child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them (i.e., grandchild, niece, or nephew);
- Age Test – The child must be (a) under the age of 19 at the end of the year and younger than you (or your spouse, if filing jointly), (b) under the age of 24 at the end of the year, a student, and younger than you (or spouse, if filing jointly), or (c) any age if permanently and totally disabled;
- Residency Test – The child must have lived with you for more than half of the year;
- Support Test – The child must not have provided more than half of his or her own support for the year; and
- Joint Return Test – The child is not filing a joint return for the year (unless that return is filed only to get a refund of income tax withheld or estimated tax paid).
In addition to the above, a qualifying relative must satisfy the following tests in order to be claimed as your dependent:
- Not a Qualifying Child Test – The person cannot be your qualifying child or the qualifying child of any other taxpayer;
2. Member of Household or Relationship Test – The person either:
- must be related to you, with “related” meaning:
- Children, stepchildren, legally adopted children, eligible foster children, and any descendants (i.e., grandchildren);
- Siblings, including half and step siblings;
- Parent and grandparents;
- Aunts and uncles;
- Nieces and nephews; and
- Fathers-in-law, mothers-in-law, sons-in-law, daughters-in-law, brothers-in-law, and sisters-in-law.
- or must live with you all year as a member of your household (and your relationship must not violate local law).
3. Gross Income Test – The person’s gross income for the year must be less than $3,900; and
4. Support Test – You must provide more than half of the person’s total support for the year.
There are always exceptions to the general rules. For more information regarding dependents for federal income tax purposes, refer to IRS Publication 501. As always, it is best to consult with a licensed attorney or tax preparer who can assist you with the analysis.