You can reduce the amount of your taxes or increase your tax refunds by claiming an additional personal exemption for each of your dependents. You may also save thousands of dollars by claiming the child tax credit, the child and dependent care tax credit, and the earned income tax credit.
However, the IRS rules for claiming a dependent – child or relative – aren’t as easy as picking a name off your family tree. Many possible scenarios make it hard to determine qualified dependents for your tax return. Here are the general tests to help you determine a qualified child dependent.
He or she can be a biological, step-, adopted or foster child; a full, half or stepsibling; or a grandchild, nephew or niece – but only if the person lives with you for at least six months and one day of the year.
Only one taxpayer can claim a child as a dependent. If the child is under shared custody, the household where he or she spends the most prescribed time gets the prize. If the child spends equal time between the two parents, the one with the bigger adjusted gross income (AGI) can claim the child as a dependent.
The child dependent must be under age 19 by Dec. 31 of the tax year. If the person is a full-time student for at least five months out of the year, he or she can be a dependent until the age of 24. There is no age limit for dependents who are totally and permanently disabled.
Generally, you cannot claim a married person who lived with you for a year as a dependent, unless the married person does not file a joint tax return.
If the child dependent is employed, he or she must have a gross income of less than $3,400 or be unable to provide more than half of his or her own support for the tax year. For instance, 17-year old Miley Cyrus would not qualify as Billy Ray’s dependent since she made something like $25 million last year.
The other category, qualifying relative, applies to individuals related to you in ways specified in the qualifying child dependent section. It also includes parents and stepparents, aunts, uncles, grandparents and other direct ancestors. You can also add your in-laws: father, mother, brother and sister. The relative must have lived with you the whole year and meet some of the requirements that apply to the child dependent.
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