IRS Regulations on Dependency

November 22, 2011 by  Filed under: Taxes 

Claiming a dependent on your tax return can greatly reduce one’s tax liability. Having dependents increases the exemption amount claimable, hence reducing one’s taxable income, and by extension, tax burden. Dependents also qualify one to enjoy tax benefits such as child and dependent care credit and head of household filing status. However, before claiming dependency, a person has to meet the IRS requirements for a dependant.

A dependent is generally one that you support or take care of: a child, relative, even a friend. For tax purposes, not everyone under your care qualifies as a dependent. A few rules have been formulated to help determine who a qualifying child or relative is.

Rules for Qualifying Children as Dependents:

According to the IRS, the definition of a child is: “a natural child, an adopted child, a stepchild, or an eligible foster child.” In addition, a dependent being claimed as qualifying must meet four of the following tests:

The relationship test: a qualifying child can be a sibling, step-sibling or descendant, as well as other relationships mentioned above.

The residency test: the qualifying child has to have the same principal abode as the taxpayer for a period not less than half the year. Exemptions exist to cater for temporary absences. The residency test is still passed if a qualifying child is away due to custody arrangements, school, an illness, military duty, or business.

The age test: a qualifying child has to be either under the age of 19 or both under the age of 24 and a fulltime student for at least five months of the year. No age limit exists for someone who is permanently and totally disabled.

The support test: the person being claimed as a dependent must not have provided for half of his own support.

Other additional tests have to be passed depending on the tax credit being claimed.

Dependency Exemption and Head of Household Filing Status:

The individual being claimed as a dependent must meet the following additional tests:

Citizenship test: He or she must be a U.S. citizen, national or a resident of the U.S. Canada or Mexico

Joint return test: If a dependent is married and files a joint return, the dependent does not count as a qualifying child, except in circumstances where the dependent and his or her spouse are not required to file taxes, and do so only to obtain a refund.

Child and dependent care credit:

In addition to the four basic tests, there is a modification to the age test. The child must be under age thirteen unless permanently or totally disabled.

Child tax credit:

To qualify for the child tax credit, the child must be under age 17 and claimed as your dependant.

Earned Income Credit (EIC):

The conditions to be met are a bit relaxed here, as only the relationship, age, and residency tests need to be passed. In addition, the child must have lived with the claimant for more than half the year in the U.S.

In some circumstances, a child may qualify as a dependent for two taxpayers. As a result, the IRS has developed rules to determine which taxpayer claims the benefits:

· When the two taxpayers cannot determine who will claim a child, then the child will be the parent’s qualifying child.

· If the taxpayers happen to be the parents, and file their returns independently, the parent whom the child lived with for the longest period of time during the year qualifies for benefits due.

· If the periods of time the child spends with either parent are equal, the parent with the highest Adjusted Gross Income can claim the tax benefits.

· If none of the taxpayers is the child’s parent, then the taxpayer with the highest AGI may claim the benefit.

Rules for qualifying relatives:

Rules exist for dependents that may not fall into the category of a qualifying child, but may meet other standards set by the IRS, enabling a taxpayer claim certain tax credits. Relatives will be required to meet the following four rules, in addition to the joint return and citizenship tests in order to qualify:

Qualifying child test: The individual cannot be the qualifying child of anyone else.

The relationship test: The relative can be a child, a descendant of a child, sibling, a step-sibling, niece or nephew, parent or step-parent, or a parent’s ancestor, an uncle or aunt, father or mother-in-law, or an individual who lives with the taxpayer for the entire year, regardless of status as a relative, as long as the relationship between the taxpayer and individual does not violate local law.

Gross income test: A dependent’s income must not exceed a certain ceiling amount. ($3,650 in 2010)

Support test: the taxpayer must have provided for more of half of the relative’s support. Difference between this and the support test for the qualifying child should be noted. Unlike in the latter test, the taxpayer is required to prove that the taxpayer provided half or more of the dependent’s support.


Determining whether an individual is a qualifying child or relative can be confusing. To obtain help on determining an individual’s status, contact the IRS at 1-800-829-1040, or contact the local IRS office.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA. / Tel:888.321.6188

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