Who Can You Claim as a Dependent on Your Tax Return?
Welcome to our guide on claiming dependents on your tax return! As a taxpayer, claiming dependents can have significant benefits, including reducing your taxable income and increasing your tax refund. However, it can also be complicated to understand who you can claim as a dependent. In this article, we will cover the basics of claiming dependents, who qualifies as a dependent, IRS requirements, the do’s and don’ts of claiming, aging parents, co-parenting rules, and commonly overlooked dependents.
The Basics of Claiming a Dependent on Your Taxes
First, let’s start with the basics. A dependent is a person who relies on you for financial support. Along with tax benefits, you may be responsible for providing food, shelter, and clothing. However, not everyone who relies on you financially can be claimed as a dependent on your tax return. The IRS has specific requirements for claiming dependents.
According to the IRS, dependents can either be qualifying children or qualifying relatives. To qualify as a dependent, the person must meet five tests: relationship, age, residency, support, and joint return.
If the person meets these tests, you may be eligible to claim them as a dependent, which can have significant benefits on your tax return, such as creating a tax deduction, lowering your taxable income, or increasing your refund.
Who Qualifies as a Dependent: Step-by-Step Guide for Taxpayers
Now, let’s go into more detail on who qualifies as a dependent by explaining the five tests:
Relationship Test
The person must be related to you in one of the following ways:
- Your child, stepchild, foster child, or a descendant of any of these (e.g., grandchild)
- Your brother, sister, stepbrother, or stepsister
- Your parent, stepparent, or another direct ancestor (e.g., grandparent)
- Your niece, nephew, aunt, or uncle (must be related by blood or marriage)
Age Test
The person must be either:
- Under age 19 at the end of the tax year
- Under age 24 at the end of the tax year and a full-time student for at least five months out of the tax year
- Permanently and totally disabled at any time during the year, regardless of age
Residency Test
The person must have lived with you for more than half of the tax year. There are exceptions for temporary absences, such as for education, business, vacation, or military service.
Support Test
You must have provided more than half of the person’s total support during the year.
Joint Return Test
If the person is married, they cannot file a joint tax return with their spouse, except to claim a refund of withheld taxes.
Understanding the IRS Requirements for Claiming a Dependent
Once you’ve determined that the person meets the five tests, you must also follow IRS rules for claiming dependents. The IRS has strict requirements for claiming dependents, including:
- You can only claim a dependent on one tax return per year. This means that you and your ex-spouse/partner can’t both claim the same child, for example.
- You must provide the dependent’s Social Security number or individual taxpayer identification number (ITIN) on your tax return. Failure to do so can result in penalties and delays in processing your return.
- You may be required to file Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, if you are a noncustodial parent claiming a child as a dependent.
Special Rules for Divorced or Separated Parents
If you are divorced or separated and have a child with your ex-spouse or partner, there may be special rules for claiming the child as a dependent. The custodial parent (the one who the child lives with for more than half of the year) is generally the one who gets to claim the child as a dependent. However, the custodial parent may agree to release the dependency exemption to the noncustodial parent by filing Form 8332. If no agreement is made, the IRS has specific tiebreaker rules to determine which parent gets to claim the child as a dependent.
Rules for Claiming Dependents with Disabilities
If you have a dependent with a disability, there may be additional tax benefits available to you. For example, you may be eligible for the Earned Income Tax Credit (EITC) if you have a dependent with a disability who is younger than age 19 at the end of the tax year or younger than age 24 and a full-time student. You may also be able to claim the Lifetime Learning Credit or the Child and Dependent Care Credit.
The Do’s and Don’ts of Claiming a Dependent on Your Tax Return
Now that we’ve covered who qualifies as a dependent and the IRS requirements for claiming dependents, let’s go through some tips for what to do and what to avoid when claiming dependents on your tax return.
The Do’s of Claiming a Dependent:
- Make sure the dependent meets all five tests outlined by the IRS before claiming them on your tax return.
- Document all sources of income and support provided to the dependent.
- Provide the dependent’s Social Security number or ITIN to avoid penalties and delays.
- File Form 8332 if you are a noncustodial parent claiming a child as a dependent.
- Explore additional tax benefits, such as the EITC or the Child and Dependent Care Credit, if you have a dependent with a disability.
The Don’ts of Claiming a Dependent:
- Claim someone as a dependent who does not meet the IRS tests.
- Claim a dependent who is already being claimed by someone else, such as an ex-spouse/partner.
- Fail to provide the dependent’s Social Security number or ITIN on your tax return.
- Forget to document the support provided to the dependent or keep accurate records.
When Can You Claim an Aging Parent as Your Dependent?
If you are caring for an aging parent, you may wonder if you can claim them as a dependent on your tax return. The answer depends on whether they qualify as a qualifying relative. To qualify as a qualifying relative, your parent must meet the following tests:
- Your parent cannot have gross income of more than $4,300 (in tax year 2020).
- You must provide more than half of your parent’s support during the year.
- Your parent cannot file a joint tax return with their spouse (except to claim a refund of withheld taxes).
Additionally, if you have a parent with Medicaid, there may be additional rules to follow. Medicaid may place a lien on your parent’s property, and you may be required to report this lien on your tax return. Be sure to consult with a tax professional if you are unsure if you can claim your aging parent as a dependent.
Divorced and Separated Parents: Who Gets to Claim the Children as Dependents?
If you and your ex-spouse/partner are co-parenting, you may wonder who gets to claim the children as dependents on your tax return. Generally, the custodial parent (the one who the child lives with for more than half of the year) gets to claim the child as a dependent. However, if the parents agree, the noncustodial parent may be able to claim the child as a dependent by filing Form 8332. If no agreement is reached, the IRS has specific tiebreaker rules to determine which parent gets to claim the child as a dependent.
Commonly Overlooked Dependents: A Guide to Claiming Non-Traditional Dependents on Your Tax Return
Finally, we come to non-traditional dependents, which can be commonly overlooked when filing tax returns. Non-traditional dependents can include unmarried partners, children of unmarried partners, and grandparents. To claim non-traditional dependents, they must meet the same five tests as qualifying children or qualifying relatives. Be sure to keep accurate records of the support you provide and provide their Social Security number or ITIN on your tax return.
Conclusion
As we’ve seen, claiming dependents on your tax return can have significant benefits, but it’s important to follow IRS rules and ensure that your dependents meet the specific requirements. By understanding who qualifies as a dependent, following the IRS requirements, and knowing the do’s and don’ts of claiming dependents, you can maximize your tax benefits. Additionally, if you have aging parents or co-parenting rules to follow, be sure to consult with a tax professional to ensure you are taking advantage of all available tax benefits.
