The IRS allows parents to claim tax deductions for dependent children. It's important to know how these dependents are treated for tax purposes, since they may also work and earn income. You may work and earn income, for example, but you and your parent must understand the rules for claiming you since the IRS assesses penalties and may audit you, your parent or both of you for incorrectly claiming you.
Parent Claiming You
Claiming a dependent on a tax return saves some money on taxes. Your parent may claim you if you're living at home, under the age of 19, or under 24 if you're a full time student. You must have lived at home for at least half the year. You must also be the biological child or stepchild of the person claiming you. You must have provided less than half of your own financial support for the year.
When you claim yourself, all of the tax benefits your parent received from you are transferred to yourself. While you may be in a low tax bracket already, the ability to claim yourself on your taxes means you save even more. Claiming yourself means you're able to take the standard deduction or itemize deductions, if the latter benefits you. Consequently, your parent cannot receive a deduction for having a dependent child.
If you and your parent both try to take a deduction, the IRS will either reject one of your tax returns or audit you or your parent's return. The IRS only allows one person to be claimed one time per tax year. A child cannot claim himself and then be claimed by a parent.
Talk with your parent before either of you do your taxes. If you are still living at home and dependent on your parent for financial support, expect to be claimed on your parent's tax return. However, if you're not living at home, you already do not meet the requirements of being claimed on your parent's return. You've nothing to worry about. Do your taxes and take your standard deduction.
I am a Registered Financial Consultant with 6 years experience in the financial services industry. I am trained in the financial planning process, with an emphasis in life insurance and annuity contracts. I have written for Demand Studios since 2009.