It is everyone’s favorite time of the year, right? Maybe not so much. As a tax preparer, I often get questions during this time from family and friends regarding their own personal tax returns. Questions usually stem from the idea of “getting something back”, or often sound something like, “I paid for this during the year, isn’t that tax deductible?” Another question that comes up fairly often is “Can I claim him/her as a dependent on my tax return?” A fair question that can depend on several variables.
There are two different types of dependents that can be claimed by a taxpayer. A Qualifying Child and a Qualifying Relative. Each type comes with its’ own set of rules that allow a taxpayer to claim that individual as a dependent.
A Qualifying Child must be a close relative, pass the age limit test, pass the residency and filing requirements, and pass the support test. The child must be the son (stepson), daughter (stepdaughter), brother (stepbrother), or sister (stepsister) of the taxpayer. The child may also be a descendant of any of the above and still qualify. An adopted or foster child of the taxpayer would also qualify. Only a resident of the United States, Canada, or Mexico may be claimed as a qualifying child. The child must be under the age of 19, unless a full-time student in which case the child must be under the age of 24. The child must live with the taxpayer for more than half of the year. A college student living on campus and coming back home for major breaks will typically not disqualify them from the residency test. The child may also not file a joint tax return with another taxpayer. Finally, the child must not have provided more than half of his or her own support. A dependent being awarded a scholarship is not considered contributing to half of his or her own support
When it comes to claiming a Qualifying Relative as a dependent, some different parameters are at play. The same support test applies for a qualifying relative as a qualifying child. Children (stepchildren), grandchildren, brothers (stepbrothers), sisters (stepsisters), nieces, nephews, parents and grandparents are the most common persons that can be considered a qualifying relative. A non-relative may qualify as long as they live with the taxpayer for the entire year. The relative may not file a joint tax return and must be a resident of the United States, Canada, or Mexico. The gross income limitation applies to those who are trying to claim someone as a qualifying relative. The relative’s gross income must be under a threshold of $4,400. This amount does not include Social Security income, tax-exempt interest or scholarships that the relative receives.
A common situation that arises with multiple support dependents and/or children of divorced parents, is who gets to claim a qualifying child or relative. A multiple support declaration may need to be filed when multiple taxpayers contribute, in total, over 50 percent of the dependent’s support, but no one taxpayer contributes more than 50 percent individually. In this case, Form 2120 will need to be filed and the taxpayers may decide amongst themselves who gets to claim the dependent on their tax return. In most cases, the parent who has custody of their child for the majority of the year will get to claim the child for tax purposes. This is independent of who actually provides more than one-half of the support for the child.
If you have made it this far, you may feel overwhelmed with all of the “nit-picky” rules that come with the territory. While it is a lot of information, it is imperative that you consult with your Certified Public Accountant with any questions you may have when it comes to being able to claim a dependent. You may be eligible for a list of beneficial credits on your tax return.
Published in the Victoria Advocate
Hayden Schilling, CPA is a staff accountant for Keller & Associates CPAs, PLLC.