What Is a Dependent?

What Is a Dependent?

Let me explain what a dependent is in tax terms. A dependent is someone who relies on you for financial support, and this can include your children or other relatives. If you're a taxpayer with a dependent who meets the IRS definition, you can claim a dependency exemption on your tax return.

Key Takeaways

Remember, a dependent relies on someone else for financial support and can include children or other relatives. If you have one or more dependents, you may be eligible for certain tax credits. To claim someone as a dependent, they must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.

Claiming Dependents

A dependent can be a qualifying child or another qualifying relative. Dependency is defined by three IRS tests that all dependents must meet: the dependent taxpayer test, the joint return test, and the citizen or resident test.

If someone is claimed as a dependent by another taxpayer, they cannot claim anyone as a dependent on their own tax return. If you're filing a joint return as a married person, you cannot be claimed as a dependent unless you're filing jointly just to claim a refund of withheld or estimated taxes. Again, the person must be a U.S. citizen, U.S. resident alien, U.S. national, or resident of Canada or Mexico to be claimed.

For married couples filing jointly, both can claim dependents and share the tax benefits. If filing separately, whether married or not, only one taxpayer can claim a given dependent. For separated or divorced parents, the custodial parent typically gets the dependency claim.

Qualifying Child

To be a qualifying child under the IRC relationship test, the child must be your son, daughter, stepchild, foster child placed by an authorized agency, or a descendant of any of them. This also includes your brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.

For the age test, the child must be under 19 at the end of the tax year and younger than you or your spouse if filing jointly, or a full-time student under 24 at year's end and younger than you or your spouse.

The residency test requires the child to have lived with you for more than half the year, with exceptions for temporary absences like illness, education, business, vacation, military service, institutionalized care for permanent disability, or incarceration.

Additionally, the child cannot have provided more than half of their own financial support during the tax year to qualify as a dependent.

Qualifying Relative

These tests apply only if the qualifying child tests aren't met. A qualifying relative can be any age, and they must meet the member of household or relationship test, the gross income test, and the support test.

The person must either live in your household all year or be related to you. Note that an adopted child is treated the same as a natural child, and relationships from marriage don't end with death or divorce.

For the gross income test, their gross income must be less than the threshold, which is $5,050 for the 2024 tax year. You must have provided more than 50% of their total support for the year, unlike the qualifying child test which checks if the child provided more than half of their own support.

Important Note on Exemptions

The deduction for personal exemptions is suspended until 2025. Even though the exemption amount is zero, claiming a dependent can still make you eligible for other tax benefits.

Tax Credits

Let's look at the tax credits available. The Earned Income Tax Credit (EITC) is a refundable credit for low- to moderate-income workers, especially those with children. The amount depends on your income, filing status, and number of children.

Child Tax Credit (CTC)

For 2024 and 2025, you can claim up to $2,000 per child under 18 if your income is not more than $200,000 or $400,000 if married filing jointly. If the credit exceeds taxes owed, you get up to $1,700 as a refund via the Additional Child Tax Credit.

Child and Dependent Care Credit

You may claim this if you paid for care of a qualifying individual to work or look for work. It's a percentage of work-related expenses, based on your AGI, capped at 35% for incomes under $15,000, up to $3,000 for one individual and $6,000 for two or more.

Education Credits

There are two: the American Opportunity Tax Credit (AOTC) for the first four years of higher education, and the Lifetime Learning Credit (LLC) for qualified tuition and expenses. If your dependent attends higher education, you can claim these.

What Is an Exemption?

An exemption reduces taxable income. The IRS allows various exemptions, but personal exemptions are suspended until 2025 due to the Tax Cuts and Jobs Act, though dependent exemptions still apply.

What Is a Dependent for Tax Purposes?

A dependent is a qualifying child or relative as defined by the IRS, including children, parents, siblings, or stepchildren, but not spouses. You get tax benefits for having them.

How Much Is the Tax Credit for Each Dependent?

For 2024 and 2025, the Child Tax Credit is $2,000 per dependent, with up to $1,700 refundable.

The Bottom Line

A dependent is someone relying on you for support, usually a child or relative. They must meet IRS tests like the dependent taxpayer test, joint return test, and citizen or resident test. With dependents, you're eligible for benefits like the Child Tax Credit, Child and Dependent Care Credit, and education credits.