Every year I have questions about dependent children (kids over 18). Generally there is a question once they graduate from either high school or college and they have started working. This is not a one size fits all situation. So hopefully this information will help you decide if you will claim your child or not. If I am preparing your taxes we will discuss your specific situation before filing.
There are two types of dependents.
The first is a qualifying child. To be a qualifying child the following criteria must be met:
1. Child must meet the relationship test (such as son, daughter, stepchild, brother, sister, etc).
2. The child must be under 19 at the end of the year or under 24 and a full time student, or permanently disabled
3. The child must have lived with you more than half the year (time away at college is considered a temporary absence)
4. The child must not have provided more than half of his or her own support for the year (Generally if a child made money the parent is still providing a significant amount of support for housing, insurance, food, etc. If you have a question about this one with a child that earned money, there are worksheets to assist with the calculations.)
5. The child must not be filing a joint return for the tax year (unless it's only filed to get a refund of all taxes withheld)
The second type of dependent is a qualifying relative. This is for other dependents that do not meet the criteria above for being a qualifying child. The following criteria must be met:
1. The person can't be your qualifying child or the qualifying child of another taxpayer
2. The person must be related to you in one of the following ways--child, stepchild, brother, sister, parent, stepparent, son or daughter of these relations, in-laws--relationships do not end with death or divorce OR the person must have lived with you as a member of your household (and your relationship must not violate local laws)
3. The person's gross income for the year must be less than $4300 (changes each year slightly). There are special rules for disabled individual that work in a sheltered workshop (Gross income is all income that isn't exempt from tax)
4. You must provide more than half of the person's total support for the year.
(All criteria information is from IRS Publication 17 Dependent section)
So now the question is what does all this mean? In most situations it means that a parent will claim a child until he/she is done with school. Most of the time a child finishes school in May. That year can be especially tricky. The child may have then worked the rest of the year and made a good amount of money. In that situation the primary factor that needs to be looked at is the child's living situation. If the child continued to live in your home and would meet the half year test then you would also want to look at how the child spent his or her money. You most likely still provided basic living costs (like housing, utilities, insurance, food, etc). The child may have used money to pay for schooling, a vehicle, or personal expenses. If you can still show that you provided for the child's costs and the child didn't support him/herself then you can still claim the child. Once a child is not in school at all then it becomes easier. If the child made more than $4300 (taxable income) you can not claim that child.
PLEASE MAKE SURE YOU AND YOUR CHILD TALK BEFORE THEY FILE THEIR TAX RETURN. I ALSO SUGGEST THAT IF A PARENT IS CLAIMING A CHILD THE PARENT FILES FIRST. IN THE LAST FEW YEARS I'VE HAD SEVERAL SITUATIONS WHERE THE CHILD CHECKED THAT SOMEONE ELSE CLAIMED THEM ON THE RETURN YET SOMEHOW WHEN IT WAS PROCESSED IT SHOWED THEM AS CLAIMING THEMSELVES. IF THIS IS THE CASE THEN THE PARENTS RETURN WILL GET REJECTED.
There are several things to consider when claiming a dependent. If you want to claim head of household you will need to have a qualifying child. So that may be something to factor into letting your child claim themselves. Also for parents that qualify for Earned Income Tax Credit, the child has to be claimed as a qualifying child in order to qualify for Earned Income Tax Credit. While the children we are discussing do not qualify for child tax credit there is still a $500 credit for other dependents. Finally, if a child is in college, a parent may be eligible to claim one of the education credits for school expenses. Generally a parent is allowed to claim more of a deduction than a child. So losing a qualified child as a dependent can have a big impact on a parent's return.
In 2020 (and January 2021) many people received stimulus checks. These checks were based on adults and children on the tax return. However, you probably noticed children over 16 or other dependents were not part of this calculation. So what that means when filing your 2020 tax return is that if someone that was a dependent in 2019 is no longer a dependent they will be eligible for their own stimulus payment. Only people filing taxes as "not a dependent on another person's return" will be allowed to calculate the Recovery Rebate Credit to get this additional stimulus money. So if you are not claiming a child in 2020 make sure they file for the Recovery Rebate Credit. If your child is still claimed as a dependent on your 2020 tax return then no one will be eligible for that stimulus money.
Again there is no easy answer to if someone should claim a dependent or not. Everyone's circumstances are different and need to be evaluated on a case by case basis.
There are two types of dependents.
The first is a qualifying child. To be a qualifying child the following criteria must be met:
1. Child must meet the relationship test (such as son, daughter, stepchild, brother, sister, etc).
2. The child must be under 19 at the end of the year or under 24 and a full time student, or permanently disabled
3. The child must have lived with you more than half the year (time away at college is considered a temporary absence)
4. The child must not have provided more than half of his or her own support for the year (Generally if a child made money the parent is still providing a significant amount of support for housing, insurance, food, etc. If you have a question about this one with a child that earned money, there are worksheets to assist with the calculations.)
5. The child must not be filing a joint return for the tax year (unless it's only filed to get a refund of all taxes withheld)
The second type of dependent is a qualifying relative. This is for other dependents that do not meet the criteria above for being a qualifying child. The following criteria must be met:
1. The person can't be your qualifying child or the qualifying child of another taxpayer
2. The person must be related to you in one of the following ways--child, stepchild, brother, sister, parent, stepparent, son or daughter of these relations, in-laws--relationships do not end with death or divorce OR the person must have lived with you as a member of your household (and your relationship must not violate local laws)
3. The person's gross income for the year must be less than $4300 (changes each year slightly). There are special rules for disabled individual that work in a sheltered workshop (Gross income is all income that isn't exempt from tax)
4. You must provide more than half of the person's total support for the year.
(All criteria information is from IRS Publication 17 Dependent section)
So now the question is what does all this mean? In most situations it means that a parent will claim a child until he/she is done with school. Most of the time a child finishes school in May. That year can be especially tricky. The child may have then worked the rest of the year and made a good amount of money. In that situation the primary factor that needs to be looked at is the child's living situation. If the child continued to live in your home and would meet the half year test then you would also want to look at how the child spent his or her money. You most likely still provided basic living costs (like housing, utilities, insurance, food, etc). The child may have used money to pay for schooling, a vehicle, or personal expenses. If you can still show that you provided for the child's costs and the child didn't support him/herself then you can still claim the child. Once a child is not in school at all then it becomes easier. If the child made more than $4300 (taxable income) you can not claim that child.
PLEASE MAKE SURE YOU AND YOUR CHILD TALK BEFORE THEY FILE THEIR TAX RETURN. I ALSO SUGGEST THAT IF A PARENT IS CLAIMING A CHILD THE PARENT FILES FIRST. IN THE LAST FEW YEARS I'VE HAD SEVERAL SITUATIONS WHERE THE CHILD CHECKED THAT SOMEONE ELSE CLAIMED THEM ON THE RETURN YET SOMEHOW WHEN IT WAS PROCESSED IT SHOWED THEM AS CLAIMING THEMSELVES. IF THIS IS THE CASE THEN THE PARENTS RETURN WILL GET REJECTED.
There are several things to consider when claiming a dependent. If you want to claim head of household you will need to have a qualifying child. So that may be something to factor into letting your child claim themselves. Also for parents that qualify for Earned Income Tax Credit, the child has to be claimed as a qualifying child in order to qualify for Earned Income Tax Credit. While the children we are discussing do not qualify for child tax credit there is still a $500 credit for other dependents. Finally, if a child is in college, a parent may be eligible to claim one of the education credits for school expenses. Generally a parent is allowed to claim more of a deduction than a child. So losing a qualified child as a dependent can have a big impact on a parent's return.
In 2020 (and January 2021) many people received stimulus checks. These checks were based on adults and children on the tax return. However, you probably noticed children over 16 or other dependents were not part of this calculation. So what that means when filing your 2020 tax return is that if someone that was a dependent in 2019 is no longer a dependent they will be eligible for their own stimulus payment. Only people filing taxes as "not a dependent on another person's return" will be allowed to calculate the Recovery Rebate Credit to get this additional stimulus money. So if you are not claiming a child in 2020 make sure they file for the Recovery Rebate Credit. If your child is still claimed as a dependent on your 2020 tax return then no one will be eligible for that stimulus money.
Again there is no easy answer to if someone should claim a dependent or not. Everyone's circumstances are different and need to be evaluated on a case by case basis.
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