Tax Dependents: Can You Claim Your Loved One?

Each year, many individual taxpayers are shocked at who can be claimed as a dependent – as well as who can’t. In other words, tax dependents are not just young kids! In 2023, there are more incentives for claiming dependents, especially while paying for their medical and educational expenses. We’ve highlighted the ways in which the IRS defines tax dependents and ways they can affect your taxes.

The official IRS tax dependent definition is “either a qualifying child or qualifying relative of the taxpayer” in terms of tax credits. Note that this does not include spouses.

But, naturally, this answer can lead to more questions: What does “qualifying” mean? The IRS has a system of tests to ensure that dependents qualify. Here is a quick summary of their overview:

• Qualifying Child
  • Must be related to the taxpayer.
    • A qualifying child can be an adopted child or a son, daughter, stepchild, foster child.
    • A qualifying child can also be a brother, sister, half-brother, half-sister, stepbrother, stepsister, or descendent from any of the above.
  • Must be within the age limit (see next section).
  • Must live with you for more than half of the year.
  • Must not provide more than half of their own income.
  • Must not be filing a joint return.
  • Must follow the rules if qualifying for more than one person.

• Qualifying Relative
  • Must not be a qualifying child
  • Must be a member of the household all year (assuming the relationship meet local cohabitation laws) OR be a qualifying relative:
    • A qualifying relative can be any of the following:
      • A child (as defined as a child, stepchild, foster child, or any descendent of them)
      • A sibling (as defined as brother, sister, half-brother, half-sister, stepbrother, or stepsister)
      • A parent (as defined as father, mother, grandparent, or direct ancestor)
      • A step-parent
      • A niece or nephew (defined as the son or daughter of the taxpayer’s brother, half-brother, sister, or half-sister)
      • An aunt or uncle (defined as the brother or sister of the taxpayer’s father or mother)
      • A direct in-law (as defined as a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law)
    • Must earn less than $4,300 of gross income in the tax year.
    • Must have had more than half of their total support for the year provided by the taxpayer.

For a qualified child, the tax dependent age limit is 19 at the end of the tax year or 24 for full-time students. For a “permanently and totally” disabled child, there is no age limit, and there is no age limit for qualifying relatives.

Qualifying relatives may not need to live with you necessarily, but they do need to gross less than $4,300 of income in the tax year. Qualified children need to live with the taxpayer for more than half the year; in the case of divorced parents, custodial parents tend to claim the child on the return with some exceptions.

For divorced families, there may be special tie-breaker rules or divorce conditions impacting who can file a qualifying child in a given year; however, only one divorced parent can claim a child at a time. Divorce agreements sometimes will include situations in which the parents will alternate who will claim the dependent based on the given year. In those cases, the custodial parent would need to sign IRS Form 8332. It’s important to be clear on which family member is claiming the child each year to avoid issues with the IRS.

Also, it’s important to keep in mind that not all relatives are qualifying relatives; if you were to claim your cousin, for example, that cousin would need to live with you full time.

You may qualify for a disabled or elderly adult dependent tax credit if the adult makes less than $4,300 gross income in a year, have had more than half of their support provided by you, and either live with you full time or are a qualifying relative, as long as they are not a qualifying child.

Federally, boyfriends, girlfriends, and partners who aren’t spouses can be tax dependents as long as they meet the requirements as a qualifying relative (such as earning less than $4,300 in gross income per year). Local and state laws for domestic partners tend to vary, however.

Yes, as there are numerous tax dependent credits and possible deductions that many families qualify for each year. According to congress, the average savings for Americans in 2019 were estimated at $2,300 per dependent, depending a great deal on income distribution. Typically, families use the Child and Dependent Care Tax Credit as well as the Child Tax Credit to help lower the taxes they owe.

Here are a few other possible credits:

• • The child and dependent care tax credit offers relief to families.
  • The child tax credit (CTC) is a benefit for each qualifying child.
  • Low-income families can also use the earned income tax credit (EITC).
  • Parents who have adopted can use the 2023 adoption tax credit.
  • Those who paid medical expenses for their dependents may qualify for the medical expenses deduction.
  • Those who have paid for education for their dependents may qualify for the American Opportunity Tax Credit, the Lifetime Learning Credit, or the student loan interest deduction.

Here are some real-life examples in a helpful quiz.

Who in this list can be claimed as a tax dependent?

1. A cousin who does not live with you but who has made less than $2,000 this year
2. A stepchild who spends most of the year with her custodial parent
3. A disabled friend who lives with you, who you have completely supported financially
4. A spouse’s elderly, non-working parent who doesn’t live with you, but you have supported more than half of their finances
5. A niece who is permanently and totally disabled who lives with you most of the year.

Answers: 1. No, cousins are not eligible unless they live with you full time. 2. It depends on whether the custodial parent has signed Form 8332. 3. Yes, as long as they have earned under $4,300 in gross income. 4. Yes, as long as they have earned under $4,300 in gross income. 5. Yes, especially if a doctor has determined that the condition can be expected to last for at least a year

About Tabitha Regan

Tabitha Regan is the Founder and CEO of LittleOwl CPA. She is a Certified Public Accountant, Certified Financial Planner™ and Personal Financial Specialist. In her 16+ year career span, she has developed an expertise in the specific needs of small businesses and busy professionals with accounting, tax and advisory services.