The IRS lets you take a deduction for people who live with you and receive support from you, even if they have their own income. The IRS has two sets of rules for how much income is allowed for dependents based on whether a dependent is a qualifying child or a qualifying relative.
How Much Can a Dependent Make?
The IRS recognized many types of child/parent relationships, including biological, adopted and foster as well as step children and siblings. In order to qualify as a dependent, a child must be age 18 or younger at the end of the current tax year (or under age 24 if a student) and have lived with you for at least half the year. As long as these requirements are met, a qualifying child can have any amount of income and still be claimed as your dependent.
Relatives who qualify as dependents must have had more than half their support provided by you and must be related to your or have lived in your household for the entire year. A child who does not meet all the requirements for qualifying child may be claimed as a qualifying relative. However, qualifying relatives must earn less than a maximum income level in order to qualify as dependent. For 2017 tax returns, the maximum income level for qualifying relatives was $4,050. For 2018, the maximum has been raised to $4,150.
Dependent’s Minimum Income to File Taxes
Qualifying children and relatives who are claimed as dependents but have their own income may still be required to file their own tax return if their income exceeds a specified amount. Even if a dependent is not required to file, they may want to file in order to recover money withheld for federal taxes. Parents have the option of including their dependent child’s income with their own when they file their return, unless that income exceeds the IRS threshold for dependents.
2018 Tax Law
The IRS tax tables have been revised and adjusted for inflation for the 2018 tax year and the minimum amount of income required for a dependent to file a return has also changed. For single dependents, a tax return is not required unless earned income is greater than the IRS standard deduction, which is $12,000. They also must file if their “unearned” income from interest, dividends and other types of financial distributions is more than $1,050 or if the total of earned and unearned income exceeds the larger of $1,050 or total earned income plus $350.
2017 Tax Law
If you are filing a late return for the 2017 tax year, your dependents who were younger than 65 and not legally blind must file a return if their income from wages exceeded $6,350 or if their unearned income was more than $1,050. In addition, dependents must file if their gross income was greater than the larger of $1,050 or their earned income plus $350.