The IRS defines a dependent as someone other than a taxpayer or her spouse "who entitles the taxpayer to claim a dependency exemption." In plain language, the dependent is someone whose primary financial support comes from the taxpayer and entitles the taxpayer to take a special tax exemption as a result. An exemption decreases dollar-for-dollar the amount of the taxpayer's income that's subject to income tax. The IRS is very specific about who can be claimed as a dependent and under what conditions.
In order to claim a qualifying child, a taxpayer can't be eligible to be claimed as a dependent by anyone else. The child may be married, but if she is, she can't file a joint return unless it's to have withheld tax refunded and neither she nor her spouse may claim a personal exemption. In addition, the child must be a citizen of the U.S. or a resident of Canada or Mexico. She must be the taxpayer's child or grandchild, whether natural, adopted or fostered, or a sibling, niece or nephew. The child must be 19 or younger unless she's a full-time student, in which case she may be 24 or younger. There are no age restrictions for a child "permanently and totally" disabled at any time during the year. Residency requirements state that the child must have lived with the taxpayer for more than half the year except for absences due to the child's illness, education, business, vacation or military service, or because of the child's birth or death during the year. Finally, the child must have provided less than half of her own support.
As is the case with a qualifying child, a taxpayer can't take an exemption for a qualifying relative if she herself can be claimed as a dependent by someone else. In order for an unrelated individual to be considered "qualifying," he must have lived with the taxpayer as a member of the same household for the entire year, except for temporary absences for school, vacation or hospitalizations, or he must be related to the taxpayer. A related qualifying relative is one who meets the definition of a qualifying child -- except that "qualifying relative" nieces and nephews must be related by blood -- or who is a blood-related aunt or uncle or a parent or grandparent, including step parents and parents-in-law. Related qualifying relatives don't have to have lived in the taxpayer's household. Neither death nor divorce ends in-law relationships. The qualifying relative must be unmarried or, if married, can't file a joint return except for a refund of withheld tax. It must be true that neither spouse would have owed tax had they filed separate returns and neither can claim a personal exemption on their joint return. In addition, the qualifying relative must be a U.S. citizen or a resident of Canada or Mexico. The taxpayer must have provided more than half of the qualifying relative's support during the year as determined by comparing the dollar amount of support the taxpayer provided to all other support the qualifying relative received. The IRS counts as support food, clothes, housing, medical and dental care, recreation and transportation, as well as food stamps, shelter and welfare provided by the state.
A dependent must have a gross income of less than the amount of the exemption which, in 2009, was $3,950. The IRS defines gross income as all taxable income "in the form of money, property and services." It includes unemployment benefits and some scholarships, but not welfare benefits or nontaxable Social Security benefits.
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