Rules for Claiming Dependents on Your Tax Return

Who qualifies as a dependent?

Prior to 2003, there were five or more different definitions of a dependent in the tax code. To clarify and streamline parts of the tax code, the Working Family Tax Relief Act (WFTRA) of 2004 created a single definition of a child dependent and a non-child dependent. 

A dependent is a person such as a child or elderly relative that you can claim for tax purposes. Claiming dependents generally makes you eligible for several dependent-related credits and deductions.

The two dependents are called the qualifying child or the qualifying relative (more on that below). There are extensive IRS rules around who can claim a child as a dependent.

The rules for a qualifying child dependent are:

• The relationship test: The child must be your son, daughter, stepchild, adopted child, or eligible foster child—or descendant (for example, a grandchild or great-grandchild). The child may also be a sibling, half-sibling, stepsibling, or their descendant (for example, nephew or niece).
• Age test: The child must be under age 19, a full-time student under age 24, or any age if permanently and totally disabled. NOTE: The taxpayer must be older than the child, unless the child is disabled.
• Residency test: The child must have the same main home as you for more than half the year. The child must also be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.
• Support test: The child cannot provide more than half of their own support.
• Joint return test: The child cannot file a joint return with someone.

For divorced or separated taxpayers, the IRS recognizes the physical custodial parent as the parent the child lives with more than half the year. For IRS purposes, you must count the nights because the child must live with the parent 183 nights, 184 nights if a leap year. As mentioned above, it’s important to file early to make sure that you’re able to claim your dependents before someone else does.

Can a noncustodial parent ever claim their child as a dependent? 

Yes, if the custodial parent completes and signs IRS Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent and provides it to the noncustodial parent, then the noncustodial parent can claim the child tax credit(s) for any eligible children listed on the Form 8332. The child must be a dependent of the custodial parent. 

What is a custodial parent?

A custodial parent is defined by the IRS as the parent a child lived with for more than half the year. This half year is counted by nights the child slept in the parent’s home or another home, but under the parent’s control. For example, spending the night with a friend, but living with mom, and she gave permission for a sleepover.

It’s important to note that if two or more taxpayers claim the same child, the IRS will use the “tiebreaker rule” to figure out who is eligible.

You can always speak about your specific situation with your Jackson Hewitt Tax Pro when questions arise.

What credits are available to a custodial parent?

The best way to calculate the child tax credit is with an expert, but the credit is largely based on your income and number of dependents you have. You will need to complete Schedule 8812 (“Credits for Qualifying Children and Other Dependents”). The credit phases out—meaning the credit amount reduces until it is $0 and you cannot claim it—for taxpayers using the single, married filing separately and head of household filing status whose income is $200,000 or more ($400,000 for married filing jointly) in the tax year. 

Dependent care credits

You may be able to claim the IRS Child and Dependent Care Credit if you paid expenses for the care of a qualifying individual to enable you to work, actively interview, or look for work.

Generally, you may not take this credit if your filing status is married filing separately. The amount of the credit is a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The percentage depends on your adjusted gross income.

The total expenses that you may use to calculate the credit may not be more than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals).

Earned Income Tax Credit (EITC)

Another important credit is the Earned Income Tax Credit (EITC), a tax benefit primarily designed to help low- to moderate-income individuals and families whose earned income is under a certain threshold. 

This credit is “refundable,” which means that when the EITC exceeds the amount of taxes owed, you could get the rest of it as part of your tax refund. The amount of credit varies by income, family size, and filing status. 

It’s important to note that dependents under the qualifying relative status do not qualify the taxpayer for the EITC or Child Tax Credits (CTC/ACTC). They do qualify the individual for the credit for other dependents (ODC). 

Credits for education expenses for dependents

You can claim an education credit for qualified education expenses paid by cash, check, credit or debit card, or with money from a loan. If you pay the expenses with money from a loan, you take the credit for the year you pay the expenses, not the year you get the loan or the year you repay the loan.

Other credits and deductions for claiming dependents

• Adoption Credit – This is a nonrefundable credit of up to $16,810 of expenses paid for adopting a child who is not your stepchild. Nonrefundable means it can’t result in a tax refund, but this particular credit can be carried over until used, or up to five years, whichever comes first.
• Medical expenses - You may claim medical expenses you paid for your child or another relative you were unable to claim as a dependent, due to the other parent or another family member claiming the individual.

What is a qualifying relative?

Qualifying relatives can include children who do not meet the Qualifying Child Age Test, other relatives (for example, parents, grandparents, uncles, aunts, and in-laws), and unrelated members of the household.

A person is your qualifying relative if all the following tests are met:

• Not a Qualifying Child Test: Your qualifying relative must not be a qualifying child for any other taxpayer.
• Support Test: Generally, you must provide more than half of your qualifying relative's total support. Special rules apply for children of divorced or separated parents.
• Member of Household or Relationship Test: Your qualifying relative must either live with you for the entire year as a member of your household (but the relationship cannot violate local law), or be related to you in one of the following ways:
• Child (son, daughter, or adopted child), or descendant (for example, grandchild or great-grandchild)
• Stepchild
• Sibling, half-sibling, or step sibling
• Parent or direct ancestor (for example, grandparent or great grandparent)
• Stepfather or stepmother
• Uncle or aunt
• Nephew or niece
• Father-in-law, mother-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law. Special rules may apply for kidnapped children and for temporary absences due to special circumstances such as illness, education, business, vacation, and military service.
• Unrelated individual who lived with you for the full year.

Special rules may apply for kidnapped children and for temporary absences due to special circumstances such as illness, education, business, vacation, and military service. 

 As a rule of thumb, you must provide more than half of your qualifying relative's total support. 

To claim a dependent, you cannot qualify as a dependent of another taxpayer. Your potential dependent(s) must also meet the rules for qualifying child or qualifying relative. 

We are here to help you as you navigate the ins and outs of claiming a dependent when you file your taxes. It may seem confusing in some cases, and we can help you decide what is best for you and your family. Find a Jackson Hewitt Tax Pro in a location near you.