The term dependent means ‘Qualifying Child’ or ‘Qualifying Relative’.An exemption for a qualifying child or qualifying relative can be claimed only if the following three tests are met.
Test 1: Dependent Taxpayer TestTest 2: Joint Return Test
Test 3: Citizen or Resident Test
Qualifying Child – There are six tests that must be met for a child to be considered a qualifying child:
Test 1: Relationship
Your son, daughter, stepchild, foster child, sibling, step-sibling, or a descendant of any of them (grandchild, niece, nephew, etc).
Adopted Child– An adopted child is always treated as your own child.The term ‘adopted child’ includes a child who was lawfully placed with you for legal adoption.
Foster Child– A foster child is an individual who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
Test 2: Age
Child must be under age 19 at the end of the year and younger than the taxpayer (or spouse if MFJ) or, a full-time student under age 24 at the end of the year, or permanently and totally disabled at any time during the year, regardless of age.
Full-time student– A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. To qualify as a student, the child must be, during some part of each of any 5 calendar months of the year – a full-time student at a school that has a regular teaching staff, course of study, and a regularly enrolled student body at the school. The 5 calendar months do not have to be consecutive.
Permanently or Totally Disabled– A person who cannot engage in any substantial gainful activity because of a physical or mental condition that a doctor has determined has lasted or can be expected to last continuously for at least a year or can lead to death.
Test 3: Residency – To meet this test, your child must have lived with you for more than half of the year.There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents.
Children of Divorced or Separated Parents – In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. However, the child will be treated as the qualifying child of the noncustodial parent if all four of the following statements are true:
- The Parents:
- Are divorced or legally separated under a decree of divorce or separate maintenance.
- Are separated under a written separation agreement.
- Lived apart at all times during the last 6 months of the year, whether or not they are or were married
- The child received over half of his or her support for the year from the parents.
- The child is in the custody of one or both parents for more than half of the year.
- Either of the following statements is true.
- The custodial parent signs a written declaration that he or she will claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return.
- A pre-1985 decree of divorce or separate maintenance or written separation agreement that states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child’s support during the year.
Test 4: Support
To meet this test, the child must have lived with the taxpayer for more than half of the year. There are exceptions for temporary absences, children who were born or died during the year, kidnapped children, and children of divorced or separated parents.
Test 5: Joint return
To meet this test, the child cannot file a joint return with a spouse unless the return is filed to claim a refund and no tax liability would have existed had the child and spouse filed separately.
Test 6: Special test for qualifying child of more than one person – Sometimes, a child meets the relationship, age, residency, and support tests to be a qualifying child of more than one person. Although the child is a qualifying child of each of these persons, only one person can actually treat the child as a qualifying child. To meet this special test, the taxpayer must be the person who can treat the child as a qualifying child. If the taxpayer and another person have the same qualifying child, the taxpayer and the other person(s) can decide who will treat the child as a qualifying child. That person can take all of the following tax benefits (provided the person is eligible for each benefit) based on the qualifying child.
- The exemption for the child
- The child tax credit
- Head of household filing status
- The credit for child and dependent care expenses
- The exclusion from income for dependent care benefits
- The earned income credit
The other person cannot take any of these benefits based on this qualifying child. In other words, the taxpayer and the other person cannot agree to divide these tax benefits between them. If the taxpayer and the other person(s) cannot agree on who will claim the child and more than one person files a return claiming the same child, the IRS will disallow all but one of the claims using the tiebreaker rule.
Qualifying Relative
There are four tests that must be met for a person to be considered the taxpayer’s qualifying relative:
Test 1: Not a qualifying child test
- Does not file an income tax return, or
- Files a return only to get a refund of income tax withheld.
Test 2: Member of household or relationship test
- Live with the taxpayer all year as a member of their household, or
- Be related to the taxpayer in one of the ways listed below under Relatives who do not have to live with you. If at any time during the year the person was the taxpayer’s spouse, that person cannot be the taxpayer’s qualifying relative.
- Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). A legally adopted child is considered your child.
- Your brother, sister, half brother, half sister, stepbrother, or stepsister
- Your father, mother, grandparent, or other direct ancestor, but not foster parent
- Your stepfather or stepmother
- A son or daughter of your brother or sister
- A brother or sister of your father or mother
- Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.Any of these relationships that were established by marriage are not ended by death or divorce
Test 3: Gross income test
- Schedule C income less costs of goods sold.Other Schedule C deductions do not reduce gross income.
- Gross receipts from rental property.Do not deduct taxes, repairs, etc.
- Partner’s share of the gross, not the net, partnership income.
- Gross income also includes all unemployment compensation and certain scholarship and fellowship grants.
- Nontaxable Social Security
- Income received by a permanently and totally disabled individual for services performed at a sheltered workshop.
- Scholarships received by degree candidates that are used for tuition, fees, supplies, books, and equipment required for particular courses may not be included in gross income.
Test 4: Support Test
To meet this test, the taxpayer generally must provide more than half of a person’s total support during the calendar year. The taxpayer must determine whether they have provided more than half of a person’s total support by comparing the amount they contributed to that person’s support with the entire amount of support that person received from all sources. This includes support the person provided from his or her own funds.
Age – Unlike a qualifying child, a qualifying relative can be any age. There is no age test for a qualifying relative.
Most Common Dependent Questions in the Keystone Tax Solutions Pro Program
If the dependent was born or died during the tax year, enter 12 months for ‘Number of months dependent(s) lived in your home’.
If the taxpayer is claiming the dependent for Head of Household status ONLY –
- ‘Qualifies for Child Tax Credit’ to ‘NO’,
- ‘Remove from EIC’ to ‘YES’, and
- ‘Qualifying Child Not a Dependent’ to ‘YES’
If the taxpayer is claiming the dependent for EIC purposes ONLY –
- ‘Qualifies for Child Tax Credit’ to ‘NO’,
- ‘Remove from EIC’ to ‘NO’, and
- ‘Qualifying Child Not a Dependent’ to ‘YES’
If the taxpayer is claiming the dependent, but not EIC, click here.
- ‘Remove from EIC/SSN Not Valid for EIC’ to ‘YES’, and
- ‘Qualifying Child Not a Dependent’ to ‘NO’
To manually remove a dependent from EIC in the tax program – From the Main Menu of the tax return (Form 1040) select:
- Personal Information
- Dependents & Qualifying Children
- Select the Dependent and select ‘Edit’
- Change the answer for Remove from EIC/SSN Not Valid for EIC to ‘YES’
To indicate that the taxpayer claimed as a dependent on another return in the tax program – From the Main Menu of the Tax Return (Form 1040) select:
- Personal Information
- Name & Address
- Dependent on Another Return
- Select ‘YES’ – You will then see an ‘X’ next to this option.