Understanding these rules for who does and doesn’t qualify as a dependent is critical. Your tax liability can change drastically, depending on whom you care for, which is especially important for larger families or those who care for aging relatives. Let’s break down who exactly qualifies as a dependent, how to claim them on your tax return, and the challenges involved with it all.
Qualifying Children
A qualifying child must meet the following criteria:
The individual must be your child, stepchild, foster child, sibling, half-sibling, or step-sibling, or a descendant of any of these individuals.Your child must be younger than you; younger than age 19 at the end of the tax year; younger than age 24 at the end of the tax year if they’re a full-time student for at least five months; or totally and permanently disabled.Your child must live with you for more than half the year, with a few exceptions, such as military deployment and living away at school. They must intend to return to your home after their time away.Your child can’t have paid for more than half their own support needs over the course of the year.You must be the only person claiming them as a dependent.
Qualifying Relatives
Qualifying relatives must also meet certain rules:
Your dependent must have lived with you all year if they’re not closely related to you, such as your parent or grandparent. The IRS provides a full list of types of relatives who don’t have to live with you. They can’t be your qualifying child, or the qualifying child of another taxpayer. They can’t have earned $4,300 or more for the entire 2021 tax year. This limit can increase annually to keep pace with the economy. You must provide more than half of the individual’s total financial support for the year.
Three More Rules
Three additional tests must be met before you can qualify for claiming either of these types of dependents:
Dependency taxpayer test: You’re not permitted to claim dependents if you can be claimed as someone else’s dependent. Joint-return test: You can’t claim a married individual as a dependent if they file a joint tax return unless the return is filed only to claim a refund. Citizen or resident test: The person you’re claiming must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of either Mexico or Canada (with an exception for some adopted children).
The Benefits of Claiming Dependents
The idea of claiming dependents originated in 1954 with Section 151 of the Internal Revenue Code and the introduction of personal exemptions. You could claim a personal exemption for each dependent you could claim. This reduced the amount of income on which you were taxed. The personal exemptions were eliminated by the Tax Cuts and Jobs Act (TCJA), at least from 2018 through 2025 while the TCJA remains in effect. The standard deductions were effectively doubled under the law, however. Certain tax credits for dependents were increased, and a new credit was created. These include the Child Tax Credit, the Credit for Other Dependents, and the Child and Dependent Care Credit, among others. You might additionally qualify for the advantageous head-of-household filing status if you have a dependent, although several other qualifying rules apply. You must pay for more than half the costs of maintaining your household, and you can’t be married unless you lived separate and apart from your spouse all year.
Do You Have To Claim Dependents?
It’s not mandatory that you claim dependents on your tax return, but it’s generally a good idea, because claiming them can entitle you to thousands of dollars in tax credits, among other benefits. You’re leaving money on the table each year if you choose not to add them to your tax return. Several credits do phase out at higher income levels, however. For example, for the 2021 tax year the Child Tax Credit begins reducing when income passes $150,000 on joint returns, or $112,500 on head-of-household returns, or $75,000 on single filer or married and filing separate returns.
Pros and Cons of Claiming Dependents
Pros Explained
Adding a dependent can lower your overall tax burden. The government offers a number of tax credits for dependents, to reduce the amount of tax owed each year, and several tax deductions exist for expenses paid on behalf of a dependent. Some credits are refundable. The IRS will pay you the balance of a credit after it’s zeroed out your tax bill.
Cons Explained
Claiming someone as a dependent prevents them from filing their own tax return. In some cases, it might be more beneficial for someone to file their own return. For example, your 18-year-old child with a full-time job might receive more money by filing a return on their own instead of being claimed on yours. You might not see much benefit if your income is too high. A lot of credits are income-based and phase out at higher levels, so there might not be a lot of benefit to adding a dependent to your tax return.
