Raising kids can be expensive, and some taxpayers financially support other family members as well. Fortunately, the Internal Revenue Service has your back. The personal exemptions you could claim for each of your dependents were repealed under the Tax Cuts and Jobs Act in tax year 2018, but quite a few other tax benefits that require having at least one dependent are still alive and well.
And the IRS is at least a little flexible about who you can claim as a dependent. Your dependent can be a qualifying child or a qualifying relative, and “relative” is a loose term. A qualifying relative doesn’t necessarily have to be related to you.
Qualifying Child Rules
Your qualified child doesn’t have to be your biological child. They can be adopted, a stepchild, a foster child, a sibling or even the child of any of these individuals, such as a grandchild. But the following requirements must be met:
- They must be a child younger than age 19, or age 24 if they're a full-time student.
- They must live in your home for at least half the year, although this doesn’t mean that they can’t live away at school or be temporarily absent from your home for other reasons, as long as they intend to return there.
- They can’t pay for more than half their own total support needs if they work or otherwise have income. It used to be that you had to establish that you provided more than half of a dependent's support, but that rule has been eliminated from the tax code.
The IRS waives the age limits if your child is permanently and totally disabled.
Qualifying Relative Rules
A qualifying relative is anyone who lives in your home as a member of your household for the entire year, regardless of whether you’re actually related by blood or marriage. But your dependent can live elsewhere if you are closely related. An example would be your parent.
There are some strict income requirements, however. Your dependent can’t have had more than $4,300 in taxable income as of the 2021 tax year, the return you'll file in 2022. But this doesn’t include nontaxable Social Security benefits or income earned from a disabled/sheltered workshop.
There aren’t any age limits, but your qualifying relative can’t also be your qualifying child – or anyone else’s qualifying child, for that matter. This would be the case if a taxpayer who could claim him doesn’t do so because they don't have to file a tax return. And, no, your spouse can’t be your dependent under the qualifying relative rules. Your in-law can, however.
A qualifying relative is generally anyone who lives in your home as a member of your household for the entire year, regardless of whether you’re actually related by blood or marriage.
Some Other Rules
The IRS imposes a few other rules as well, for both qualifying children and qualifying relatives:
- The individual must be a U.S. citizen, resident, U.S. national or a resident of Mexico or Canada, although there are exceptions for adopted children.
- Your dependent can’t file a joint tax return with their spouse if they happen to be married, unless it’s solely for the purpose of collecting a refund because they have no tax liability.
- You can’t claim any dependents if you can be claimed as a dependent by another taxpayer. This rule applies to your spouse as well if you’re filing jointly.
- Your dependent must have a Social Security number or taxpayer identification number.
- You can’t claim anyone who works for you, such as your housekeeper or a babysitter.
Read more: Can I Claim My Niece and Nephew on My Tax Return?
The Child Tax Credit and “Other Dependent” Credit
So what does all this get you at tax time? It can potentially make you eligible to claim the credit for other dependents or the child tax credit. The first is worth $500 per qualifying relative. The second, the child tax credit, was beefed up considerably in tax year 2021 in response to the coronavirus pandemic. It's worth $3,000 per child over the age of five up to age 18, and $3,600 per child under age six, for this tax year only. It's the return you'll file in 2022.
Your qualifying child can be no older than age 16 on the last day of the tax year in other years, not 18. Otherwise, they're your “other dependent” for the smaller of the two tax credits.
Income limits restrict some taxpayers from claiming the enhanced 2021 child tax credit: $150,000 for married filers of joint returns, $112,000 for heads of household, and just $75,000 for single taxpayers. Again, these limits are for one year only, the 2021 tax year.
The Child and Dependent Care Credit
The child and dependent care credit is equal to a portion of what you must pay someone to care for your dependents while you work or look for a job. Your dependent must be under age 13 – the IRS reasons that this is young enough to require care – or disabled.
You can claim up to 35 percent of the first $8,000 you pay for one child in 2021, or the first $16,000 for two or more children. Again, this is a temporary one-year provision for tax year 2021 in response to COVID-19. The percentage depends on your income, but it’s never less than 20 percent. Sending your kids to private school doesn’t count, but the costs of nursery schools and after-school programs do.
The Earned Income Tax Credit
This tax credit gets better as you claim more and more dependents, but it only applies to qualifying children, not qualifying relatives. And you can’t claim the earned income tax credit if you earn too much – it’s specifically designed to help low income taxpayers. You can claim it if you have no dependents if you meet the income limits, but you’ll only receive a maximum of $1,502 as of the 2021 tax year. This can ratchet up to $6,728 if you have three or more child dependents, depending on your income.
Head of Household Filing Status
One of the nicest tax perks available to single taxpayers who have dependents is being able to qualify for the advantageous head of household filing status. Your dependent can be your qualifying child or qualifying relative. Your child must live with you for more than half the year and you must pay for more than half the cost of maintaining your household.
The IRS makes an exception for some relatives living with you, including your parents, although you’d have to foot the bill for more than half their household expenses if they don’t.
You can claim a standard deduction of $18,800 as of the 2021 tax year if you and your dependents qualify, rather than the $12,550 standard deduction that’s available to single taxpayers who don’t have any dependents or who don’t meet these rules.
Can You Share Dependents With Other Taxpayers?
The IRS has a rule that no two taxpayers can claim the same dependent, but there’s a bit of wiggle room here, too.
It’s possible that none of you pay more than 50 percent of a parent's living costs if you’re jointly supporting them with your siblings or others. You can enter into a multiple support agreement in this case and submit Form 2120 to the IRS if you can all reach an agreement as to which of you can claim your parent as a qualifying relative. That individual must pay at least 10 percent of the dependent’s support, however. You can change the claiming taxpayer from year to year.
A custodial parent can transfer her right to claim her child as a dependent to the other parent for purposes of claiming the child tax credit. They can sign IRS Form 8332. The noncustodial parent can then submit the form with their tax return. This rule doesn’t apply to head of household filing status, the earned income tax credit or the child and dependent care credit, however.
The IRS will apply tiebreaker rules if you and your ex can’t agree who gets to claim your child. It will award the dependent to the parent with whom the child lived most during the tax year, typically the custodial parent, or to the parent with the higher adjusted gross income if the child lived with both parents equally.
- TurboTax: Rules for Claiming a Dependent on Your Tax Return
- TurboTax: Tax Benefits for Having Dependents
- IRS: Qualifying Child Rules
- IRS: Publication 501
- IRS: Child Tax Credit By the Numbers
- IRS: Earned Income Tax Credit Income Limits and Maximum Credit Amounts
- IRS: IRS Provides Tax Inflation Adjustments for Tax Year 2021
- IRS: Tax Guide 2021
Beverly Bird has been writing professionally for over 30 years. She is also a paralegal, specializing in areas of personal finance, bankruptcy and estate law. She writes as the tax expert for The Balance.