Dependants

Is your child your dependant?  At first it seems like a simple question, and for many of you the answer is simply yes.  However, if you are reading this article, I am guessing that for you it may not be so simple.  We will take a little time here to discuss some of the nuances of this subject.

First of all, there are two classes of dependants.  There is the qualifying child and then there is the relatively new concept of the qualifying relative.  It is important to realize up front that these exist, and in fact are different. 

I will start with the first one.  To be a qualifying child a child must meet seven tests.  These tests are:

1. Relationship – must be the child adopted child, eligible foster child, grandchild, brother, sister, stepbrother, stepsister, or descendant of any such relative.  Another words your girlfriends child, unless you have adopted it, is not your qualifying child.
2. Residency – the child must live with you for more than half the year.
3. Support – the child cannot provide more than half their own support.  This is a   fairly recent development.
4. Age – as a rule of thumb the child must be less than 19 (24 if a full time student) at the end of tax year.  An exception does exist for permanently and totally disabled children.
5. Joint return – the child cannot file a joint return.  An exception exists here as well.  If the child only filed the return to secure a refund we are ok.
6. Younger than – the child must be younger than the taxpayer.  This was added to prevent a younger sibling from claiming a brother or sister who also was still living at home with the parents.
7. AGI – if the parents can, but do not claim the child then another taxpayer can claim the child.  However in order to do this they must have a higher AGI then the highest AGI of either parent.

Qualifying child is the better dependant of the two options.  One reason is that it can qualify the taxpayer for head of household status.  Qualifying relative cannot.  Qualifying relative does not qualify for the earned income credit either.  It also can be taken by someone who does not provide over half the support of the child.  If you remember the test said that the child cannot provide over half of their own support.  It does not say the taxpayer must provide over half.  These are important differences.  What if your child doesn’t qualify under these tests?  Well there still may be hope.

Qualifying relative is your other option.  In order to be a qualifying relative a child must not be a qualifying child.  In addition the child must satisfy 5 tests.  These tests are different from the Qualifying child tests.  They are as follows:

1.  Relationship – These include everyone from the qualifying child list plus parents, grandparents, stepparents, brothers and sisters of parents, direct in laws(brother, sister, mother, father, daughter or son), or anyone who has lived in the household the entire year.  As you can see, the criteria is expanded quite a bit.
2.  Support – taxpayer provided more than half the support.  This is different wording than for a qualifying child, and it makes a big difference.
3.  Gross income – the child must make less than personal exemption amount.
4.  Citizenship – the child must be a citizen.
5.  Joint return – this is the same as the qualifying child test

 These are two different ways a person can claim a child as a dependant.  Being able to claim a dependent is important as many other deductions and credits hinge on whether a child is your dependant or not.  Just remember if a person is the qualifying child of another taxpayer, even if they do not claim the child, you cannot claim that child as a qualifying relative.  This has become a confusing tax issue for many and we recommend you seek a tax professional to help you sort through your circumstance.

The information contained on this site should in no way be considered to be professional advice in the form of either tax, accounting, or legal service or consultation. You should always consult with a professional familiar with your individual circumstances before making any specific decisions related to accounting, tax, or legal matters.