When most people think of claiming a dependent on a tax return, they think of a child who lives with them. Historically, the Internal Revenue Code (IRS) has allowed taxpayers to claim a “personal exemption” for themselves as well as any qualifying dependents. Unfortunately, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated personal exemptions starting with 2018 income tax returns.
The good news is that having dependents can still help you save money at tax time. Here’s a look at the rules for claiming a dependent and the tax breaks still available to taxpayers who can claim them.
What Makes Someone Your Qualified Dependent?
You can only claim someone as a dependent if they are your “qualifying child” or “qualifying relative.”
The IRS uses the term “qualifying child” to describe a dependent who meets four tests:
The IRS has a broad definition of “child.” It includes a son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of these.
To pass the age test, the dependent must meet one of these qualifications:
- Be under age 19 at the end of the tax year and younger than you (or your spouse if you’re filing jointly)
- Be under age 24 at the end of the tax year, a student, and younger than you (or your spouse if filing jointly)
- Be permanently and totally disabled (regardless of age)
To be considered a qualifying child, a child must have lived with you for more than half the year. Children who are temporarily away from home – for example, at camp, on vacation, or at school – are still considered to reside with you. Children who were born and died in the same year are considered to have lived with you for the entire pryear.
There are exceptions for children of divorced or separated parents and parents who don’t live together. In these cases, the child is considered to have lived with the custodial parent. However, the child can be treated as a qualifying child of the non-custodial parent if all four of the following are true:
- The parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance.
- Are separated under a written separation agreement.
- Lived apart at all times during the last six months of the year.
- The child received over half of their support from the parents.
- The child was in the custody of one or both parents for more than half the year.
- Either of the following statements is true:
- The custodial parent signs a written declaration that they won’t claim the child as a dependent, and the non-custodial parent attaches the declaration to their return using Form 8332.
- A pre-1985 decree of divorce, separate maintenance agreement, or written separation agreement applies to the tax year in question and states that the non-custodial parent can claim the child as a dependent. The agreement must not have been changed after 1984 to say that the non-custodial parent cannot claim the child, and the non-custodial parent must have provided at least $600 for the child’s support during the year.
If all four requirements are met, the non-custodial parent can claim the child as a dependent and take the Child Tax Credit. Note, however, that this does not qualify the non-custodial parent for head of household filing status, the Child and Dependent Care Credit, or the Earned Income Tax Credit.
To be a qualifying child, the prospective dependent cannot have provided more than half of their own support during the year. For example, if you provided $6,000 of your son’s support, but he had a part-time job and provided $8,000 of his own support, then he is not a qualifying child because he provided more than half of his own support.
What counts as support? It can include any of the following costs:
- Food, clothing, and recreation
- School tuition
- Medical and dental insurance and costs of care
- Furniture, appliances, and cars
- Other necessities
IRS Publication 501 includes a worksheet to help you determine whether you meet the support test.
On occasion, a child may meet the Age, Relationship, Residency, and Support tests for more than one person. Unless the parents file a joint return, only one may claim the child as a dependent. Fortunately, the IRS has tiebreaker rules to help you decide:
- If only one person is the child’s parent, the child is the qualifying child of the parent.
- If the child spent a longer period with one parent than another during the year, the IRS will treat the child as the qualifying dependent of the parent with whom they spent the most time.
- If the child spent an equal number of days with each parent, the IRS will treat the child as the qualifying child of the parent with the higher adjusted gross income (AGI) for the year.
IRS Publication 501 provides several examples that might help you determine who can claim a child as a dependent in unique situations.
Pro tip: If you have any questions about eligibility, make sure you contact a qualified tax professional. Free online tax prep software from a company like H&R Block will also help walk you through these important tax breaks.
If a person is not your qualifying child, they may be your qualifying relative if they meet these four tests:
1. Not a Qualifying Child
A child is not a qualifying relative if they are your qualifying child or the qualifying child of another person.
2. Member of Household or Relationship
The person must live as a member of your household all year or be related to you. If at any time during the year the person was your spouse, they cannot be your qualifying relative.
If a person is related to you in any of the following ways, they do not have to live with you all year as a member of your household:
- Your child (biological or adopted child), stepchild, foster child or a descendant of any of these
- Your brother, sister, half-brother, half-sister, stepbrother, or stepsister
- Your father, mother, grandparent, or another direct ancestor
- Your stepfather or stepmother (foster parents don’t qualify)
- Your niece or nephew
- A son or daughter of your half-brother or half-sister
- Your aunt or uncle
- Your in-laws: son, daughter, brother, sister, father, or mother
Any of these relationships that were established by marriage don’t end by death or divorce. Note that a cousin does not meet this test. A cousin would have to live with you all year as a member of the household to qualify as a qualifying relative.
If you file a joint return, the person can be related to either your or your spouse and does not need to be related to the spouse who provided the support.
3. Gross Income Test
To meet this test, the prospective qualifying relative must have a gross income of less than $4,300 for 2020.
The IRS defines gross income as all income in the form of money, property, and services that are not exempt from tax. That includes net income from a business after subtracting the cost of goods sold, rental income before expenses, partnership share of income, taxable unemployment compensation, and taxable scholarship income. Tax-exempt income, such as need-based public assistance and veterans’ benefits, are not included in gross income.
4. Support Test
For a prospective qualifying relative to meet this test, they must have received more than half of their support from you. Compare the amount you contributed to the person’s support with the entire amount of support they received from all sources. That includes amounts they contributed from their own funds, but it does not include amounts from their own funds that were not spent on support.
For example, let’s say your mother received $2,400 from an IRA distribution and $300 in interest, for a total income of $2,700. She spent $2,000 for lodging and $400 for recreation and put $300 in savings. In total, she contributed $2,400 to her own support because the $300 she put into savings was not used for her own support this year. If you contributed more than $2,400, then you meet the support test.
Sometimes, a person (such as an elderly parent) is supported by more than one person (such as two or more adult children), and no one person provides more than half of the total support. In this case, those who provide more than 10% of the support can decide that they will each take a turn, in succeeding years, to claim the person as a qualifying relative.
General Dependency Rules
Now that you’ve determined whether your dependent counts as a qualifying child or qualifying relative, there are a few rules you should know about that apply to everyone.
First, if you are a dependent of another taxpayer, you cannot claim any dependents yourself. For example, let’s say Mary, age 18, has a son, Tim, and they both live with Mary’s father, Josh. Josh is employed and paid all of the costs of maintaining the household for the year. Mary had $2,500 of income from her part-time job. In this scenario, both Mary and Tim are dependents of Josh. Mary cannot claim Tim as her dependent – even if she has income and is filing a return to claim a refund of her federal withholding – because she, herself, is a dependent of her father.
Second, a dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or resident of Canada or Mexico.
Finally, you cannot claim a married person who files a joint return as a dependent, unless you file the return only to claim a refund of withheld income taxes or estimated taxes paid. So, in the example above, if Mary is married to Dan, who is a full-time student and not employed, and she and Dan file a return as married filing jointly only to claim her refund of withheld federal income tax, Mary is still Josh’s dependent.
Potential Benefits of Claiming a Dependent
Although the TCJA eliminated personal exemptions, there are still some tax benefits of claiming dependents. They include:
- Child Tax Credit. This is available until the year the child turns 17 and is worth up to $2,000 per child for a maximum of three children.
- Child and Dependent Care Credit. This is available until the year the child turns 13, unless the child is disabled, in which case there is no age limit.
- Earned Income Tax Credit (EITC). This is available while the child is under 19, or under age 24 and in school.
- Education Credits. These include the American Opportunity Tax Credit and the Lifetime Learning Credit.
- Credit for Other Dependents. This is available for dependents who don’t qualify for the Child Tax Credit. It’s worth up to $500 per qualifying dependent.
Prior to the TCJA, taxpayers could claim an exemption for themselves and each dependent listed on their return. For 2017, the last year personal exemptions were allowed, each exemption was worth $4,050. For example, if a couple filed a joint return and had two dependent children, they would be entitled to a total of four exemptions, or $16,200, to reduce their adjusted gross income, in addition to claiming either the standard deduction or itemized deductions.
When the TCJA went into effect on January 1, 2018, it eliminated the provision for personal exemptions. But taxpayers with several young dependents have some reason to hope that personal exemptions will return. Many provisions of the TCJA, including the one eliminating personal exemptions, are set to expire at the end of 2025. Unless Congress extends the TCJA or passes a new tax reform bill that affects the status of personal exemptions, they might make a comeback.
Even without the personal exemption, claiming a dependent can be worth several thousand dollars. Plus, several of the tax credits available to taxpayers with dependents are refundable, meaning they don’t just offset the tax you owe, but they can also increase your refund. For more help, check out our complete tax guide.
Can you claim a dependent? Which tax breaks for dependents are the most valuable to you?