The US tax system is complicated. (Profound, I know.) Before you can even pick a filing status (discussed in another post), you need to be aware of who should be included on your tax return. In general, you receive a tax benefit that reduces your tax liability for each person listed on your return. But, who can you list on your return?
Minor children are a gimme, but what about college age kids? What about your parent in a nursing home? What about your cousin who has been sleeping on your couch? To answer these questions the IRS has a series of tests and definitions to decide if a person can be claimed on your tax return. There are generally 3 types of people who can be listed on your return Qualifying Children, Qualifying Relatives, and Qualifying Persons.
Qualifying Child
A Qualifying Child is typically what people think of when they think of a dependent. They are the minor children, but also the college age kids as well. The IRS has 5 tests to see if someone can be a Qualifying Child: Relationship, Age, Residency, Support, and Joint Return.
A Qualifying Child must be closely related to you. They can be one of your descendants: children (birth, step, adoption, or foster), grandchildren, great-grandchildren, etc… However, they can also be one of your siblings or their descendants. If they are one of you siblings or their descendants, then they must be younger than you unless they are disabled. Cousins and their descendants are not Qualifying Children.
The Age test for Qualifying Children is pretty straightforward. The child must be one of these 3 options:
- Under 19 by the end of the tax year;
- Under 24 by the end of the tax year and a full-time student for at least 5 months;
- Any age and totally and permanently disabled.
The Residency test means the child must have lived with you for MORE than half the year. There are exceptions for temporary absences, such as school or medical needs, but generally you need to have lived with the child at least 183 days (184 in leap years). Children born during year the count as living with the parent the full year.
SPECIAL RULE for divorced or separated parents. The parent with whom the child lived for more than half the year is considered the custodial parent and may allow the noncustodial parent to claim the child. The custodial parent must complete Form 8332 and provide it to the noncustodial parent for taxes. Paid preparers (and VITA) cannot just use a decree or judgment when filing taxes and are required to have Form 8332 for a child. This special rule does NOT allow the noncustodial parent to claim all tax benefits for the child and custodial parents can still claim some benefits.
The Support test means the child cannot provide over half of their own support. This doesn’t mean the parents need to provide over half of the support, just that the child cannot provide it themselves. This means a parent can still claim the child even if over half the support for the child was provided by family, friends, nonprofits, or government assistance. The support just cannot be from the child’s own wages, scholarship, loans, social security benefits, etc… The IRS has some worksheets in Publication 501 to help work through the support calculations if there is any doubt.
Lastly, there is the Joint Return test. This test is for if the dependent is married. The dependent cannot file a joint return with their spouse and be claimed as a dependent on another return. They can file separately and be claimed but cannot file jointly. There is an exception if the joint return is only to receive a refund of withholding and no other tax benefits are claimed.
If a potential dependent meets those 5 tests, then they *can be claimed on your tax return.
Qualifying Relative
Like with Qualifying Children, the IRS has a series of tests to determine if someone should be a Qualifying Relative. There are 4 tests for Qualifying Relatives: Not a Qualifying Child, Household/Relationship, Income, and Support. The first test is easy. A Qualifying Relative cannot be a Qualifying Child of you or someone else. The Household/Relationship test is a bit more nuanced.
Unlike a Qualifying Child, a Qualifying Relative does not need to be related to you. However, they must meet either the Household OR Relationship test. If the Qualifying Relative is not related to you, then they must have lived in your household ALL year. As with the Qualifying Child Residency test, exceptions for temporary absences apply, such as school or medical needs. If they are related to you, then they do not need to live with you all year to be a Qualifying Relative. This Relationship test is both more broad and more restrictive than the Relationship test for Qualifying Child.
- You may claim your parents, grandparents, or other direct ancestor even if they don’t live with you.
- Similarly, your children and their descendants don’t have to live with you.
- Your siblings and their children don’t need to live with you to be claimed, but your grandnieces or grandnephews do need to live with you.
- Your parents’ siblings may also be claimed, but not your cousins.
The Income test is both straightforward and complicated. A Qualifying Relative cannot have more than $4400 in gross income (for tax year 2022, this amount adjusts for inflation). This includes business income before most expenses are taken and income that is not otherwise exempt from taxes. The nontaxable part of social security or scholarships do not count toward this total.
The Support test is also straight forward but is different from the Qualifying Child Support test. Unlike for a Qualifying Child, you must have provided over half the support for someone you want to claim as a Qualifying Relative. There is an exception for Qualifying Relatives who can qualify for a Multiple Support Declaration. A Multiple Support Declaration (Form 2120) is for when someone would have been the Qualifying Relative of multiple people, but for meeting the Support test. This is most common for a parent or grandparent who is cared for by multiple family members but no individual provides over half the support. All of the family members providing the support can decide who gets to claim the dependent as a Qualifying Relative. They complete Form 2120 and provide it to the person claiming the dependent.
If someone meets all these Qualifying Relative tests, they *can be claimed as a dependent on your return.
Qualifying Person
A Qualifying Person is different from the other dependency issues in this post because it doesn’t let you claim the person as a dependent. Instead, it qualifies you for the Head of Household filing status. A Qualifying Person will almost always be a dependent of someone, but not necessarily the return where they are listed as a Qualifying Person.
In general, a Qualifying Person is a Qualifying Child or Qualifying Relative who has lived with you for more than half the year. They also need to be listed as a dependent on your tax return, except if you are the custodial parent of a Qualifying Child and have let the noncustodial parent claim the child as a dependent. A Qualifying Relative used as a Qualifying Person must meet the Relationship test for Qualifying Relatives. This means a cousin who lived with you all year is not a Qualifying Person, but a sibling can be. Your parents may be used as Qualifying Persons regardless of if they lived with you at least half the year. All other Qualifying Persons must live with you at least half the year or meet the exceptions for temporary absences, such as school or medical needs.
*Asterisk!
*You do not need to claim someone on your tax return you are entitled to claim, HOWEVER, you and your dependent may be leaving tax benefits on the table. If someone COULD HAVE claimed you as a dependent and didn’t, you still need to report that someone could have claimed you on their taxes. Many credits and tax benefits cannot be claimed by someone who could have been claimed as a dependent, so don’t forgo claiming someone thinking it will help their tax return.
Disclaimer
If you have questions on your tax situation, please send an email to taxes@evanslegalservices.com and an appointment can be scheduled to discuss the details. As always with any post like this, this is not intended to serve as legal advice and everyone’s situation is different. Please consult an attorney about your situation.
Updated December 2022