Parents and primary caretakers can claim dependents on their return – usually, these are their own children or a qualifying relative (often a parent). Dependent minor children and adult children in school who file taxes do not get to claim the same amount of standard deduction taken by most other filers.
Am I Considered a Dependent?
The IRS is very clear on when a parent can and cannot claim a child as a dependent. In turn, a dependent status also impacts and limits the tax benefits available to a taxpayer.
The first thing to ascertain is whether you are a dependent for tax purposes. The IRS defines a dependent as someone who is a qualifying child or relative of the taxpayer. The test to determine dependent status must answer three primary questions regarding whether anyone can claim the individual as a dependent.
The IRS rules for claiming a qualifying child are slightly different from claiming a qualifying relative. A child can be claimed until 18 or 24 if the child is in school full-time for at least part of the year. A disabled child may be claimed indefinitely, but care should be taken in how that may impact SSI benefits for an adult child.
If a dependent does not qualify as a child, they may meet dependency requirements as a qualifying relative. A qualifying relative notably has income limits for the dependent in addition to the support test. If a dependent relative works, they cannot earn more than half of their living expenses, or they cease to qualify as a dependent.
Read More: Claiming Dependents for Your Taxes
When Should Dependents File Taxes?
Children may earn income, but cannot provide over half of their own support for the year. Very often, dependents do not need to file because their living expenses are usually funded primarily by the taxpayer claiming them. There are also times when dependents work and pay taxes that would result in a refund. In such a situation, the dependent would file their taxes for the purpose of recovering a tax refund.
There are certain times when dependent children are required to file. Dependents must file if they owe tax on tip income or have self-employment income over $400. If a dependent child has $1,100 or more of unearned income, such as from interest or dividends, they must also file. Unearned income above $2,200 is taxed at the parent's marginal tax rate.
If a child must file, often a parent may file for the child. With regard to taxes, it is important to know that individuals claimed as dependents cannot claim their own dependents.
Read More: Can I File Taxes If My Parent Claimed Me?
Dependent with Itemized Deductions?
If a dependent has deductions, they may use Schedule A to itemize. It is advisable to itemize when there are eligible deductions that total more than the available standard deduction. The standard deduction for dependents is typically less than for standard filers, so it may make more sense to itemize.
The standard deduction for single dependents is the greater of $1,100 or earned income up to $12,200 plus $350. The standard deduction may also be higher based on age or disability. It is advisable to use the IRS Standard Deduction Worksheet for Dependents to calculate the correct amount before electing to itemize. It may not be necessary to itemize if the standard deduction will suffice.
Form 8814 may be used if the parent or guardian includes the child’s interest or dividend income on their own return. However, this action may increase tax liability for the parent. A parent who includes this income on their return cannot include the itemized deductions the child could have taken if their return had been filed separately.
Hashaw Elkins is a financial services and tax professional, as well as a project management consultant. She has led projects across multiple industries and sectors, ranging from the Fortune Global 500 to international nongovernmental organizations. Hashaw holds an MBA in Real Estate and an MSci in Project Management. She is further certified in organizational change management, diversity management, and cross-cultural mediation.