If you claim a dependent on your income taxes, you receive an exemption that can translate into significant savings on your taxes. Though typically a dependent is your child, you can claim other relatives as your dependents as long as they meet the IRS eligibility requirements. The IRS does have qualifying rules related to a dependent's income and rules about providing their support.
A dependent can be a child or other relative. To determine if the person you wish to claim qualifies, he must meet three tests -- the dependent taxpayer test, the joint return test and the citizen or resident test. If you can be claimed as a dependent by someone else, you cannot claim any dependents on your return. If you file jointly and you or your spouse can be claimed by someone else, you cannot claim a dependent. You will have failed the dependent taxpayer test. Under the joint return test, you cannot claim a dependent if the dependent is married and filed a joint return with her spouse, unless they had no tax liability and filed simply to get a refund. However, if they file the return to get the refund as a result of a tax credit, such as the Making Work Pay credit, the exception to the joint return test does not apply and you cannot claim them. The dependent test prohibits you from claiming a dependent who is not a U.S. citizen, U.S. resident alien, U.S. national or a resident of Canada or Mexico, unless the person is a legally adopted child.
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A child must be your child, stepchild, foster or adopted child or their descendant such as your grandchild. The child must be under 19 and younger than you or your spouse, or under 24 and a full-time student, or disabled and any age. The child must have lived with you for more than half the year, unless they live at school. You must provide more than half the child's total support for the year. If the dependent is your child and your child works, there is no dollar amount maximum for your child's earnings when figuring dependency.
IRS regulations do not consider all money that you or your child receive in figuring the support test. For example, scholarships your child received do not count toward support. If you have a foster child, the amount the state pays you for support of the child is not considered when determining whether you provided half the support of your child. However, if your income was $2,000 and your child had a part-time job and made $6,000, you cannot claim that you paid for more than half of the child's support and he cannot be claimed as a dependent.
A qualifying relative does not have to meet the age test. For example, if your 30-year-old son makes no more than $3,700, lives with you and you provide more than half of his support, you can claim him as a dependent. Your qualifying relative does not have to live with you if he is a grandchild, parent, sibling or a sibling's child, an in-law or your aunt or uncle. Support is calculated by determining how much you contributed to the person's support relative to what he contributed to his own support. The IRS has a worksheet to help you make the support determination for a relative (see Resources, Page 20).