Claiming dependents can help you save thousands of dollars on your taxes each year. Yet many of us aren't aware of who may qualify as our dependents.
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Key Takeaways • For tax year 2023, the Child Tax Credit is up to $2,000. The Credit for Other Dependents is worth up to $500. • The IRS defines a dependent as a qualifying child (under age 19 or under 24 if a full-time student, or any age if permanently and totally disabled) or a qualifying relative. • A qualifying dependent can have income but cannot provide more than half of their own annual support. • A taxpayer can’t claim a dependent if they are a dependent themselves, if the dependent files a joint tax return with a spouse (except in certain cases), or is claimed as a dependent on someone else’s tax return. |
What is a dependent?
For tax purposes, a dependent is someone “other than the taxpayer or spouse” who qualifies to be claimed by someone else on a tax return. More generally speaking, a dependent is someone who relies on another person for financial support, such as for housing, food, clothing, necessities, and more. Typically, this includes your children or other relatives, but it can also include people who aren’t directly related to you, such as a domestic partner.
Once you identify someone as a dependent on your tax return, you’re informing the IRS that you met the requirements to claim them as a dependent.
For tax years prior to 2018, taxpayers were allowed to reduce their taxable income by a certain amount for each dependent claimed on a tax return. This is known as an exemption deduction. In tax year 2017, it amounted to $4,050 per qualifying dependent. Beginning in 2018, the exemption deduction went away and was replaced by a typically more generous Child Tax Credit or the Other Dependent Credit depending primarily upon the age of the dependent and relationship to the person claiming the dependent. A credit is different from a deduction in that the credit can directly reduce your tax while a deduction can reduce the amount of income that is subject to tax.
Why claim someone as a dependent?
If you have a family, you need to know how the IRS defines “dependents” for income tax purposes. Why? Because it could save you thousands of dollars on your taxes.
For tax years prior to 2018, every qualified dependent you claimed could reduce your taxable income by up to the exemption amount, equal to $4,050 in 2017. This could add up to substantial savings on your tax bill.
Beginning in tax year 2018 going through 2020, and beginning again in 2022, exemption deductions were replaced by:
- An increased standard deduction
- A larger Child Tax Credit (worth up to $2,000 per qualifying child)
- A bigger Additional Child Tax Credit (up to $1,500 per qualifying child)
- A new Credit for Other Dependents, worth up to $500 per qualifying dependent (not to be confused with the Child and Dependent Care Credit)
For 2021 only, the Child Tax Credit is expanded by the American Rescue Plan raising the per-child credit to $3,600 or $3,000 depending on the age of the child. The credit is also fully refundable for 2021. To get money into the hands of families faster, the IRS sent out advance payments of the 2021 Child Tax Credit beginning in July of 2021.
The 2023 Other Dependent Credit for qualifying relatives is $500.
Dependent rules also apply to other benefits such as:
- Earned Income Tax Credit
- Child and Dependent Care Credit for daycare expenses
- Medical expense deductions, various other itemized deductions and most tax credits that involve children or family issues
Qualifying for these benefits can make the difference between owing money and receiving a refund.
The basic rules aren’t complicated but it can be difficult to apply those rules to certain family situations. That’s especially true if you have a son off at college, a cousin who stays with you during the summer, or a daughter with a part-time job. The questions below will help you decide which relatives you can claim as dependents.
What qualifies someone as a dependent?
The IRS rules for qualifying dependents cover just about every conceivable situation, from housekeepers to emancipated offspring.
Fortunately, most of us live simpler lives. The basic rules will cover almost everyone. Here’s how it all breaks down.
There are two types of dependents, each subject to different rules:
- A qualifying child
- A qualifying relative
For both types of dependents, you’ll need to answer the following questions to determine if you can claim them.
- Are they a citizen or resident? The person must be a U.S. citizen, a U.S. national, U.S. resident, or a resident of Canada or Mexico. Many people wonder if they can claim a foreign-exchange student who temporarily lives with them. The answer is maybe, but only if they meet this requirement.
- Are you the only person claiming them as a dependent? You can’t claim someone who is claimed as a dependent on another tax return, who states that they are not able to be claimed as a dependent on their own tax return (takes a personal exemption for himself) or someone who claims another person as a dependent on their own tax form. This requirement commonly applies to children of divorced parents. There are certain “tie breaker rules,” which are found in IRS Publication 501. These rules establish income, parentage, and residency requirements for claiming a child.
- Are they filing a joint return? You can't claim someone who's married and files a joint tax return. Say you support your married teenaged son: If he files a joint return with his spouse, you can’t claim him as a dependent. This rule doesn’t apply if the dependent files a joint return only to claim a refund of income tax withheld or any estimated tax paid.
TurboTax Tip: The inclusion of qualified dependents on your tax return is one of the best tax benefits available. It can open the door to many tax credits and deductions that can lower your tax bill.
Qualifying child
In addition to the qualifications above, to claim a qualifying child, you must be able to answer "yes" to all of the following questions.
- Are they related to you? The child can be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, adopted child or an offspring of any of them.
- Do they meet the age requirement? Your child must be under age 19 or, if a full-time student, under age 24. There's no age limit if your child is permanently and totally disabled.
- Do they live with you? Your child must live with you for more than half the year, but several exceptions apply.
- Do you financially support them? Your child may have a job, but they cannot provide more than half of their own support.
Qualifying relative
Many people provide support to their aging parents. But just because you mail your 78-year-old mother a check every once in a while doesn’t mean you can claim her as a dependent. Here's a checklist for determining whether your mom (or other relative) qualifies.
- Do they live with you? Your relative must live at your residence all year or be on the list of “relatives who do not live with you” in Publication 501. About 30 types of relatives are on this list.
- Do they make less than $4,700 in 2023? Your relative can't have a gross income of more than $4,700 in 2023 and be claimed by you as a dependent.
- Do you financially support them? You must provide more than half of your relative’s total support each year.
In all cases, to claim someone as a dependent on your tax return, you can't be claimed as a dependent on someone else’s return.
Examples of Claiming Dependents
Married filers with two minor children
If you file jointly with your spouse and have two minor children who don’t earn income and live with you for more than half the year (though some exceptions apply), you can likely claim them as qualifying children dependents on your tax return.
Divorced filers with two minor children
If you are divorced and have a custody agreement in place between you and your ex-spouse for your two children, the person who can claim these children on their tax return will come down to which person can satisfy the criteria provided by the IRS for claiming a dependent child. Typically, the person with whom the children live with over half the year will be able to claim the dependents on their tax return. But there may be a separate legal agreement stipulating the other parent may claim the children as dependents.
Multiple siblings supporting an elderly parent through a multiple support agreement
If multiple adult children are supporting their elderly parent, generally the child who provides more than 50% of their support can claim them as a dependent. However, you can also use a multiple support agreement to determine which sibling can claim the elderly parent on a tax return. Even in this situation, you'll need to contribute a minimum of 10% to their support, but this falls considerably below the standard 50%.
Claiming a domestic partner
You can also claim your domestic partner as a dependent if they meet the requirements set forth in the qualifying relative dependent category. Typically, claiming a domestic partner is a challenge because of the low amount of income the partner can earn before becoming ineligible for being claimed.
Deductions and credits available when claiming dependents
- Earned income tax credit: The earned income tax credit is the largest financial support program for working people with low to moderate income. The refundable tax credit works by reducing income tax and often increasing tax refunds for low to moderate income taxpayers and can amount to as much as $7,430 for a family with three or more children for the 2023 tax year. To receive the credit you don’t necessarily need to have children, but the credit amount is typically higher for those taxpayers who have qualifying children.
- Child and dependent care credit: This refundable tax credit helps parents pay for daycare for a qualified dependent while working, going to school, or if a parent is unable to care for themselves. The credit amounts to between 20% and 50% of up to $6,000 of expenses in tax year 2023.
- Child Tax Credit and additional Child Tax Credit:
- For 2023, the child tax credit is up to $2,000 per qualifying child under age 17.
- For 2021, the Child Tax Credit is $3,600 for each qualifying child under the age of 6 and to $3,000 for qualifying children ages 6 through 17. These new changes came from the American Rescue Plan and are allowed for single and separate married filers earning up to $75,000 per year, or up to $150,000 for joint filers. If you earn more than these thresholds, you're still eligible for the additional child tax credit amounting to $2,000 per-child credit using the original Child Tax Credit income and phase-out amounts. Additionally, the entire credit is fully refundable for 2021.
- Credit for other dependents: If you have a qualifying relative as a dependent on your return, you're entitled to claim a nonrefundable credit of up to $500. You can claim this for each qualifying relative you have on your tax return.
- Adoption credit: The 2023 adoption tax credit is a nonrefundable tax credit worth up to $15,950 of expenses you’ve paid for the adoption of a child who isn't your stepchild. While the credit is nonrefundable, you may carry over any remaining, unused credit value for up to five years. The amount of adoption credit you can claim relates to how much you spend on your adoption. For example, if you have $7,000 of qualified adoption expenses in 2023, you can’t claim the full $15,950 credit. Likewise, if you had $20,000 in adoption expenses, you can only claim up to the $15,950 credit limit.
- Medical expenses: If you paid for medical expenses for your qualifying child or relative dependent, you may claim those as a deduction, subject to rules around the medical expenses deduction. Generally, this means you can deduct your qualified unreimbursed medical care expenses that exceed 7.5% of your adjusted gross income. Claiming this deduction also requires you to itemize your deductions on Schedule A, removing the ability to claim the standard deduction.
- American Opportunity Tax Credit and Lifetime Learning Credit: These two tax credits are meant to cover part of the cost related to qualified education expenses. This can be for yourself, spouse or dependents while enrolled in college, vocational school or work-related training.
Frequently asked questions about claiming dependents
How much can a dependent child earn in 2023?
A qualifying child can earn an unlimited amount of money and still be claimed as a dependent, so long as the child doesn’t also provide more than half of his or her own support.
However, if the dependent child is being claimed under the qualifying relative rules, the child’s gross income must be less than $4,700 for the year in 2023.
When does your child have to file a tax return?
For 2023, a child typically can have up to $13,850 of earned income without paying income tax. However, self-employment income and unearned income such as that from investments have different thresholds for children to file tax returns.
When should I stop claiming my child as a dependent?
There may come a time when you can no longer claim your child as a dependent. It might be because of their age (your child no longer qualifies if over the age of 18 or 23 if a full-time student unless disabled), you no longer pay for half their financial support, or they’ve moved out of the house. If you can no longer claim them under the qualifying child dependent rules you might be able to claim them under the qualifying relative tests.
Can you claim adults as dependents on your taxes?
You can claim adults as dependents on your taxes if they meet the criteria for qualifying relatives. Many people care for elderly parents and claim them as a qualifying relative dependent. Likewise, you can claim a domestic partner on your return as a dependent as long as they meet the requirements.
Generally, the biggest hurdle to overcome by claiming an adult as a dependent is the income test. Adult dependents can’t have a gross income of more than $4,700 in 2023. If you follow all the guidelines and the adult meets the criteria, you can claim them as an adult dependent, opening up the opportunity to claim additional tax deductions and credits to lower your tax bill.
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