Who can claim a dependent on a tax return?
You may take a dependency exemptions for qualified dependents. There are different criteria for a "qualifying child" and a "qualifying relative."
A child must meet four tests to be considered your qualifying child:
1. the child must be your son, daughter, stepchild, eligible foster child, or grandchild. In addition your brother, sister, half-brother or sister, niece or nephew will qualify. An adopted child will qualify.
2. Age - The child must be under age 19 at the end of the year or a full time student under age 24 at the end of the year. Note that they cannot have reached their 19th or 24th birthday by the end of the year.
3. Residency - The child must have lived with you for more than half the year. Absences for illness, education, or other temporary absences due to special circumstances count as living with you.
4. Support - You must have provided over half the support for the child.
To qualify as a relative, the following tests must be met:
1. The person cannot be your qualifying child
2. Member of household or relationship - The person must be a member of your household for the entire year or related to you as a child, stepchild, eligible foster child, grandchild, brother, sister, half brother, half sister, stepbrother, stepsister, parent, grandparent, niece or nephew, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
3. Gross income - the person cannot have more than $4,000 in gross income. Gross income does not include tax exempt income.
4. Support - You must provide over half the support for the person.
In addition, you cannot take a dependency exemption unless the dependent has a social security number.
If a child is born during the year, you can take a full dependency exemption for that child. If a dependent dies during the year, you can take a full dependency exemption for that dependent. You may not take an exemption for a stillborn child.
The law also provides that if the relationship between you and the potential dependent violates local law, that person cannot be taken as a dependent. For example, if local law prohibits unmarried adults from living together, one cannot claim a dependency exemption for the other.
If a student can be taken as a dependent on their parents' return, it usually results in a lower total tax for the student and parents combined, as the parents are usually in a higher tax bracket.
Support Test for children of Divorced or Separated Parents
Generally, the IRS will honor the terms of the divorce agreement regarding which parent is entitled to the dependency exemption for their children. As a rule, the custodial parent (the parent having custody for more than half the year) is eligible for the exemption if there is no agreement. The custodial parent may complete a Form 8332 to release the exemption to the non-custodial parent.
Multiple Support Agreements
In some cases no one person provides over half the support for an individual. In this instance all parties who provide over 10% of the support and are qualified to take the exemption except for the support test may enter into an agreement. This agreement is termed a "Multiple Support Agreement," and designates one person to take the exemption. This agreement must be signed by all parties who could qualify for the exemption. Form 2120, Multiple Support Declaration, is used for this purpose.
Eligible Foster Child
An eligible foster child is an individual who is placed with you by an authorized placement agency or by order of any court having jurisdiction.
Full Time Student
To qualify as a full time student, your child must be enrolled on a full time basis in an elementary school, middle school, or high school, college, university, or trade school for a part of five months during the year. Full time is determined by the institution. The five months do not have to be consecutive. Correspondence schools and online education do not qualify for this purpose.