Claiming dependent exceptions on your individual tax return can help with what you will ultimately have to pay in taxes. It can potentially lower your taxes due or even possibly lead to a larger tax return. However, in order to properly claim dependents, the IRS has laid out very specific tests that the dependent must meet. For starters, pets cannot qualify no matter how you may feel about your “fur baby.” Sorry to burst any bubbles.
Qualified Children
Generally, a taxpayer can claim a qualified child if:
- The child is the son, daughter, stepchild, or legally adopted child of the taxpayer. Younger siblings may also qualify, given that:
- The age of the child is less than 19 years old, OR if a full-time student, less than 24 years old.
- The child must have the same principal place of residence as the taxpayer, for at least more than half of the year.
- The child does not contribute to more than half of his or her own support.
What happens if your dependent, for example a younger cousin who is couch surfing in between jobs, doesn’t meet these requirements? They may qualify as a “Qualified Relative.”
Qualified Relative
In some ways, the requirements may sound similar to “Qualified Children”, but there are differences. Assuming they didn’t meet the qualified child rule, in order for dependents to qualify as a Qualified Relative:
- The dependent does not contribute to more than half of his or her own support.
- They cannot be claimed as a dependent filing a joint return.
- Must be a citizen of the USA, or resident (green card holder) of USA, Mexico or Canada.
- Must be a relative, this includes parents, grandparents, siblings, aunts, uncles, nieces and nephews.
- If not a relative, then the dependent must live with the taxpayer for the whole year and doesn’t violate local laws. Cousins and live-in non-relatives MAY be claimed as qualified dependents in this case.
Other Considerations
- Divorced parents can claim a qualifying child. However only one of them can claim the dependent child. This often leads to legal drama.
Properly determining qualified dependents can be a time-consuming task for individuals, especially if one may be involved in running a small business. Count on us at MiklosCPA, a California-based CPA firm that has helped businesses and individuals with their tax-related questions and concerns. We utilize the latest in cloud-based accounting services with the personal touch of regular communications to keep you up to speed on the accounting of your business. If you want to learn more about our services, contact us! Also, for future updates and blog entries, follow us on our social media pages.