"Qualifying" Dependents & Receiving Dependent Exemptions
The IRS defines a dependent as a qualifying child or relative of the taxpayer. They entitle the taxpayer to claim a dependent exemption on their return. A spouse cannot be qualified as a dependent and both children and relatives have specific criteria to qualify as dependents.
A qualifying child can be a son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them that is: under the age of 19 as well as younger than you are at the end of the year or under the age of 24 (by the end of the year) and a full time student and younger than you or was permanently disabled at any age. To qualify, they cannot provide more than half of their own financial support and must have lived with the taxpayer for more than half of the year (exceptions being at school, on vacation, on business, away for medical care, military service, or detention in a juvenile facility).
In order for them to qualify as a dependent, they need to be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. This qualifying child cannot be married if they are to be listed as your dependent. They also must be younger than the filer. Lastly, in order for someone to claim them as a dependent, they cannot be claimed as a dependent of someone else's during the same filing year. If the qualifying child adheres to all of the above they can be listed as a dependent.
The qualifying relative to be claimed as a dependent, must, like the child, be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico. They must also not be married or capable of inclusion in someone else's return. Some additional requirements to claim the deduction are:
- They are either a: son, daughter, stepchild, foster child, or a descendant of any; brother, sister, or a son or daughter of either of them; father, mother, or an ancestor or sibling of either of them; stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
- They are not the qualifying child dependent of any other taxpayer
- They have a gross income of less than $4,300
- The taxpayer provided over half of their financial support
If all of these are applicable to a taxpayer's situation, they can claim the individual by going to line 6c, columns 1-3 on the Form 1040. They must not check the box on line 6c, column 4.
Special Rules and Exceptions
If the dependent is a legally adopted child, and the taxpayer does not know or have their social security number, they will need to obtain an adoption taxpayer identification number for them. This can be done using W-7a form. If the dependent is not a U.S. citizen or resident alien, it is likely that an ITIN will need to be used instead of the social, this is requested by using a W-7 form.
While dependents generally must live with the taxpayer to qualify, there are some situations in which people can qualify without doing so. Children, parents or relatives temporarily living elsewhere because of a filer's conflict with business, illness or military service should still qualify as, this is a temporary relocation and they plan to return to live with them. Note: the individual must have still paid over half of the housing costs for the dependent during a temporary stay elsewhere.
If a qualifying relative is permanently disabled, certain incomes performed at a sheltered workshop may be excluded from the $4,300 or less income.
If there is no majority support for a relative, a multiple support agreement will allow for several people to take turns claiming that individual on their taxes (i.e. when more than one child contributes to the support of an elderly parent).
Who is Eligible for the Child & Additional Child Tax Credit?
A qualifying child, for purposes of the child & additional child tax credit, must meet each of the following criteria:
- A child, stepchild, foster child, grandchild, sibling, or other descendant of the taxpayer.
- The person does not provide more than 50% of their own annual support
- The person lives with the taxpayer for at least half of the calendar year
- The person is claimed by the taxpayer as a dependent
- If the person files a joint return, it's only to claim a refund of their income taxes withheld or estimated taxes
- The person is a citizen, resident alien, or US national
The amount of the tax credit for the year 2021:
- $3,000 for kids ages 6-17
- $3,600 for kids under 6 years old
For 2021, this credit is now fully refundable. This means that families who owe no federal income tax will receive the full credit.
This credit is available in its entirety to taxpayers with an adjusted gross income (more here) of:
- With a filing status of single and income no more than $75,000
- With a filing status of head of household and income no more than $112,500
- Those filing a joint return or qualified widows/widowers with income no more than $150,000
Households that earn more than these amounts may still be eligible for a reduced Child Tax Credit. E-file.com's software can help to calculate the credit you are eligible for based on your income.
Q&A: What if your Dependent does not qualify for the Child Tax Credit Is there a Credit for Other Dependents?
Credit for Other Dependents (ODC) is a credit for individuals with children who do not qualify for the Child Tax Credit. For instance, those who do not have the required Social Security Number. This credit is actually in addition to the credit for child and dependent care expenses from Schedule C of the 1040, on line 2. It is also in addition to the earned income credit from 1040 or 1040-SR on line 27. The maximum that can be claimed for this credit is $500. The IRS has published guidelines on the limits of both the CTC and the ODC in the 2020 Publication 972.