Claiming dependents on your tax return can make a big difference in what you pay in taxes (or how big a refund you get).
Each child you can claim as a dependent on your tax return knocks $3,400 off your taxable income, saving a sweet $850 in the 25% bracket. But children aren't the only ones you can claim as dependents.
Despite recent attempts by the IRS to clarify whether or not someone qualifies as a dependent, today's complex living arrangements often raise questions as to just who can be claimed on your taxes. There are now two classes of people who can qualify as a dependent:
- qualifying children
- qualifying relatives
Read the following Q&As, designed to clear away the confusion about who can and can not be claimed as a dependent.
Q. The rules say a qualifying child must live with you for at more than half the year. My daughter was born in October. Does that mean I have to wait until next year to claim her?
A. No. Even a child born on December 31 qualifies as a dependent and earns the full $3,400 exemption. The same rule applies if a child dies during the year. A child who is born or dies during the year is treated as having lived with you all year long.
Q. My girlfriend and I live together. She doesn’t have a job, so I pay the rent and for all the groceries. Can I claim her as my dependent?
A. Perhaps, if she meets the requirements for a qualifying relative. That means you must have lived together all year long, her gross income must be less than $3,400 and you must have provided more than half of her support. One other test: your living arrangements must not violate local law. Six states (Mississippi, Virginia, West Virginia, Florida, North Dakota and Michigan), for example, have rarely-enforced laws prohibiting cohabitation, and the IRS notes that some states prohibit couples from living together if one party is married to someone else. In such a case, the IRS says, a dependency exemption would be disallowed even if the other requirements are met.
Q. My girlfriend and her two-year-old son live with me and I basically pay all the expenses. Can I claim both of them as my dependents?
A. Yes, if they meet all the IRS requirements for dependents. Did they live with you all year long? Did you provide more than half of their support? Did neither of them have gross income of $3,400 or more? If you can answer “yes” to all three questions, then you may claim both your girlfriend and her son as your dependents. (This assumes your living arrangements don’t violate local law. See above.) Until recently, in this situation, the boyfriend could not claim the child as a qualifying relative because the child was considered a qualifying child of the mother. However, the IRS now says if the parent’s income is so low that he or she doesn’t have to file a tax return, then the boyfriend who lives with the mother and child all year long can claim the child as a dependent.
Q. After our 28-year-old daughter’s divorce, she and her two young children moved back in with me and my wife. Can we claim all three of them as dependents on our tax return?
A. The answer turns on how much money your daughter made in 2007. If she made less than $3,400 and you provided more than half of her support for the year, then she can be claimed as your dependent as a qualifying relative. The same rules apply to your grandchildren. If your daughter made more than $3,400, she doesn’t qualify as your dependent, but the grandkids might, because they can be qualifying children for both you and your daughter. If your daughter agrees to let you claim the children as your dependents—and doing so will save the family money if you’re in a higher tax bracket—then you may claim them. In that case, of course, she could not claim them.
Q. Our 25-year-old son is back home after completing his college degree. He has a pretty good job, so he makes too much for us to claim him as a dependent. That doesn’t matter to us anyway, since we’re stuck in the AMT where we don’t get any benefit for dependents. We’ve heard that there’s a way he can claim his 16-year-old sister as a dependent, since we all live together in the same house. Is that possible?
A. Yes, your daughter may qualify as his qualifying child as well as your qualifying child. Siblings are on the list of relatives that can be qualifying children. As long as your children lived together for more than half the year and your daughter did not supply more than half of her own support, she can be claimed as your son’s dependent. Since you get no benefit for claiming your daughter as a dependent, allowing your son to do so would cut the family’s overall tax bill.
Q. My divorce was final last year, and the three kids live with me. Now my ex says that, since he’s paying child support, he’s going to claim them as dependents on his return. He says that means I can’t claim them on mine. Is that true?
A. Not unless your divorce decree gives him that right. Since the general rule for qualifying children demands that the child live with you more than half the year, children of divorced parents are usually dependents of the custodial parent. There are exceptions. The custodial parent can release the exemption to his or her ex-spouse by signing a written declaration (Form 8332) that the noncustodial spouse must attach to the tax return each year he or she claims the children as dependents. Or, if your divorce decree gives your ex-husband the right to claim the children, he can do so if he attaches key pages of that document to his tax return. Otherwise, you get to claim the children as your dependents. If your husband claims them, too, the IRS will step in and deny his claim.
Q. Our 30-year-old son has fallen on hard times. Because he lost his job, my husband and I are basically supporting him—paying rent on his apartment and sending him money for food. Can we claim him as a dependent?
A. Although he’s too old to be your “qualifying child,” he may qualify as a “qualifying relative” if he earned less than $3,400 in 2007. If that’s the case and you provided more than half of his support during the year, you may claim him as a dependent.
Q. My 83-year-old mother moved in with me when she could no longer live alone. Her only income is her Social Security, so she doesn’t have to file a tax return. Can I claim her as my dependent?
A. Yes, assuming you provide more than half of her support, she can pass the test as a qualifying relative. Tax-free Social Security benefits don’t count as gross income for the $3,400 test. When figuring that portion of her support you provide, include a value for the housing you provide. If someone else helps support your mother—one of your brothers or sisters, for example—and your combined support passes the 50% threshold, you may claim your mother as a dependent if you file a Form 2120, Multiple Support Agreement.
Q. My daughter won a full-ride scholarship to an expensive college. I’m thrilled, but I think the value of the tuition is more than what it costs me to feed and clothe the young scholar. If I don’t provide more than half of support, do I lose her as a dependent?
A. Don’t worry. First, scholarships are specifically excluded when figuring support. And, remember, the test for a qualifying child is no longer that you provide more than half the support but that she does not provide more than half of her own support. You can still claim her, assuming she’s under age 24.
Q. My wife and I separated at the end of September and our 15-year-old son lived with me in October and then with his mother the rest of the year. We’ll be filing married-filing-separate returns this year. Who gets to claim our son as a dependent?
A. It’s up to you and your wife. You might decide that the parent who gets the biggest tax benefit (the one in the higher tax bracket) should claim the exemption. If you can’t agree, however, the exemption goes to your wife because your son lived with her for more of the year than he lived with you.
Q. My boyfriend and I live together with our 3-year-old son. Since we’re not married, we can’t file a joint return. Which one of us gets to claim our son as a dependent?
A. It’s up to you. Since he qualifies as a qualifying child for each of you, either parent may claim the child as a dependent. If you can’t decide, the exemption goes to whichever of you reports the highest adjusted gross income on your separate tax return.
Q. Our 17-year-old received a $100,000 inheritance from his uncle last year. Does that mean we can’t claim him as a dependent on our 2007 return?
A. Not unless he splurged on an expensive car, lavish trip or otherwise spent a lot of the money on his on behalf. When it comes to the qualifying child tests, it doesn’t matter how much money a child receives during the year (from work, a gift or inheritance). What matters is if he provides more than half of his support. Any money he saved doesn’t count toward going toward his support, so you can probably still claim him as your dependent.
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My 17 year old daughter and her boyfriend who is 24 moved to our home in august 2009, she also has a baby who was born in may of 2010, neither my daughter or her boyfriend work so we support all three of them 100 percent. I know we can claim my daughter and her child as dependnts but can we also claim her boyfriend since he has lived here all year and had no income?
Posted by: Jennifer | November 04, 2010 at 06:46 PM
If my only income is social security can i file taxes and carry my two minor children?
Posted by: Nichole | February 01, 2011 at 05:00 PM
How many dependents can i carry on my 2010 tax return? Also does carrying alot of dependents make you owe the IRS?
Posted by: Nichole | February 01, 2011 at 05:02 PM
i did not work all of 2010 but had a baby can i file for taxes to claim him? also i worked in 2009 but the co. didnot take taxes of my pay stubs will this efect my taxes
Posted by: rose g. | February 14, 2011 at 08:43 PM