I receive a number of questions every tax season regarding eligibility rules for claiming someone as a dependent on their tax return. Obviously this is an important topic because being able to claim someone as a dependent provides a number of tax benefits/exemptions and ultimately a lower tax bill. Further, tax payers may also get access to tax credits like the child tax and earned income credits through their dependents. Finally, claiming someone as a dependent can allow unmarried taxpayers to be eligible to file as head of household which means access to much more favorable tax brackets and a higher standard deduction.
IRS publication 501, Exemptions, Standard Deduction, and Filing Information, provides a lot of detailed information on this topic. I have provided a summary below and you can also see more Rules for Claiming a Dependent on Your Tax Return (via Turbo Tax).
A dependent is someone who is a qualifying child or a qualifying relative. You are allowed one exemption for each dependent. For the latest tax year you can deduct a given amount – shown in the table below by tax year – for each exemption you are eligible for. This includes yourself, your spouse if married filing jointly, and for eligible dependents. Note that for higher incomes (see limits) the dependent exemption is phased out. Further if you are claiming qualifying relatives and other unrelated Persons (e.g boyfriend or girlfriend), you cannot claim them as a dependent if they have gross yearly income over the IRS prescribed amount as shown in the table below (adjusted annually). This is generally the same as the dependent exemption amount.
|Tax Year||Dependent Exemption Amount||Gross Income Limit (Qualifying Relative)|
There are various other tests (dependent taxpayer, joint return and citizen/resident) and rules to claim someone as a dependent which are summarized in the table below.
If two or more people claim the same dependent, the IRS will audit both the returns to determine who has the strongest case for the claim. The losing party will be required to pay additional taxes and possibly a penalty. Note that, while you can claim an exemption for your spouse if filing a joint return, your spouse is never considered your dependent.
Head of Household – Unmarried individuals who qualify for head of household filing status can claim an exemption for their qualified dependents if they meet the following criteria:
To file as head of household you must meet all the following requirements: 1) You are unmarried or considered unmarried on the last day of the year. 2) You paid more than half the cost of keeping up a home for the year. 3) A qualifying person lived with you in the home for more than half the year.
Parent-Child Exemptions – If a parent or another qualifying person claims you as a dependent, you may not claim your personal exemption on your own tax return. This is important for first time tax filers who were originally dependents on their parent’s tax return.
Source: IRS publication 501 provides more details and examples on the above and is worth reviewing if you want further clarification.