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Tax Time: 3 Ways Your Dependents Can Save You Money

Jan 29, 2018 3 min read Wanda Marie Thibodeaux

Key Takeaways

  • You can determine whether someone qualifies as your dependent by looking at tests the IRS lays out in Publication 501.
  • Dependents do not necessarily have to be related to you or live with you for the entire year.
  • An individual may be your dependent either as a qualifying child or qualifying relative, but not both.


For tax purposes, a dependent is defined as a "qualifying child" or a "qualifying relative." But a qualifying child doesn't have to be your own offspring, and even people who are not related to you can be qualifying relatives. The Internal Revenue Service uses a series of tests to determine who you can claim.



What are some guidelines for claiming dependents?

Generally speaking, you can't claim someone as a dependent if you're a dependent yourself.

A qualifying child must:

  • Be related to you (e.g., son, daughter, half-sister, adopted child or their offspring).
  • Be under age 19, under age 24 if going to school full time OR any age if permanently/totally disabled.
  • Live with you for more than half a year (there are some exceptions, such as temporary absences to attend school).
  • Receive more than half of their financial support from you, even if they're working.
  • NOT be claimed by anyone else, such as an ex-spouse.


A qualifying relative must:

  • Live with you all year OR be on the list of relatives who don't live with you (see Publication 501, e.g., mother, son-in-law, sister).
  • Have a gross income of $4,050 or less in 2018.
  • Receive more than half of their financial support from you, even if they're working.
  • NOT be claimed by anyone else or fit the criteria for a qualifying child.


3 ways dependents can put money back in your pocket

Now let's examine some common dependency examples:

Example 1

Mark's 20-year-old girlfriend, Janice, moves in with him in February. They have a baby boy in March. Janet stays home with their son for his first year, so she doesn't work or go to school. Her income before having the baby is $3,897.

Janice is a qualifying relative because her income is less than $4,050, her parents cannot claim her as a child due to her age, she's been a member of the household for more than half the year and Mark provides more than half of her financial support. Mark also can claim the baby as a qualifying child. Janice cannot claim the baby because she is Mark's dependent.


Example 2

John, 21, lives with his brother, Andrew. John is working toward his undergraduate degree. He's working but earns only about $5,000 out of the $15,000 he needs. Andrew makes up the difference.

Andrew can claim John as a qualifying child because of their relationship, the fact that John is under 24 while going to school, John lives with Andrew full time and John can't be claimed by anyone else.


Example 3

Marybeth is a senior with no income who lives alone. Because her son Justin earns much more than his two younger siblings, he covers about 60% of her expenses while they cover 25% and 15%, respectively.

Marybeth doesn't have to live with Justin all year because she is listed as an exception in Publication 501. Justin's siblings can't claim her because they don't pay more than half of her expenses. Since she also meets the gross income test, Justin can claim Marybeth as a qualifying relative.


What you can do next

Review IRS Publication 501 carefully to see how many tax credits you can take beginning in 2018. If you have any doubts, talk to a qualified professional who can take a closer look at the specifics of your case — there are special rules and exceptions that may apply.


Wanda Marie Thibodeaux is a freelance writer and sole proprietor of Takingdictation.com. Her work has appeared in online and print publications such as The Finance Base, Legal Beagle, Bankaroo and Inc.com.


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