The IRS dependent exemption is designed to reduce the tax burden on taxpayers who are responsible for supporting a dependent.
People who have children are the most likely to apply for this. Nonetheless, this rule is not limited to dependent children.
You might be looking after someone who is disabled, or you could have to care for an elderly parent who can no longer take care of themselves.
We will look at this exemption and see how much it’s worth and how you can claim the dependent exemption.
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What is the dependent exemption amount?
The original dependent exemption amount worth $4,050 is no longer available. However, other tax benefits, such as the child tax credit, are still available to claim. It is currently worth up to $3,600 per child.
There is also an additional $500 tax credit for other dependents and a dependent and child care tax credit you may be able to claim.
Here are 3 credits and exemptions for having dependents in your household.
1. Child Tax Credit: You may qualify for the Child Tax Credit, which is a tax credit for your dependent children that is superior to a tax exemption in that it cuts your taxes dollar for dollar.
Beginning in the fiscal year 2021 (tax returns due in 2022), the Child Tax Credit under the American Rescue Plan rose from $2,000 to up to $3,000 for each qualified child over the age of six and up to $3,600 for every qualifying child under the age of six.
You are entitled to the entire credit if your income is less than $150,000 for married couples filing jointly, $75,000 for single filers, or $112,500 for head of household.
Families who are not eligible for the expanded $3,000 or $3,600 credit because their modified adjusted gross income exceeds the aforementioned modified adjusted gross income may still claim the Child Tax Credit up to $2,000 for each qualifying child under the existing tax provision.
This means individuals earning up to $200,000 or married couples filing jointly earning up to $400,000 may still be eligible.
Eligible families may receive an advance payment of up to $300 per month for each child under the age of six and up to $250 per month for each child aged six and above from the 2021 Child Tax Credit.
Rather than receiving this credit as part of your 2022 refund, these payments may be made in advance for the tax year 2021.
2. Other Dependent Credit: If you are not eligible for the Child Tax Credit and your dependent child is beyond the age of 17 or you assist a friend or family, you may still be eligible for the Other Dependent Credit of up to $500 per qualified individual.
If your adjusted gross income exceeds $200,000 (or $400,000 for married filing joint couples), the credit starts to taper down.
3. Child and Dependent Care Credit: Childcare is costly, but Uncle Sam may assist you.
If you are employed or actively pursuing employment and pay for daycare for a dependant under the age of 13 (there is no age restriction if handicapped), you may claim the Child and Dependent Care Credit.
All acceptable costs include nursery school, private kindergarten, after-school activities, childcare, and even summer and winter day camps.
There are a total of five tests determining who counts as a qualifying child. These are relationship, residence, age, support, and joint support.
For relatives, the tests are qualifying child, gross income, total support, and member of household/relationship.
Taxpayers may also be surprised to learn that it is possible to claim boyfriends, girlfriends, and friends if they were a member of the household for the entire tax year.
Tests to Determine a Qualifying Child
Relationship – The dependent must be your child, adopted child, foster child, brother/sister, or a descendant of these, such as a nephew or grandchild.
Residence – The qualifying child must have lived with you for more than half of the tax year.
Age – Qualifying children must be under the age of 19. Children under 24 only qualify if they were full-time students for a minimum of five months—children who are totally and permanently disabled qualify regardless of their age.
Support – They cannot have provided most of their own support during the tax year.
Joint Support – The child must not have filed a joint return for the year.
Qualifying children may only be claimed on one tax return. For example, a single father may not claim their child as a qualifying child if the mother has opted to claim them on her tax return.
Tests to Determine a Qualifying Relative
Qualifying Child – A qualifying relative cannot be claimed as a qualifying child on another tax return.
Total Support – You must provide more than half of their total support throughout the year.
Member of Household/Relationship – The person, whether a friend, romantic partner or a non-blood relative, must have lived with you for the entire year or be a direct blood relation.
How Much is the Dependent Exemption Amount?
The old dependency exemption used to be worth $4,050 for each qualifying child. However, changes to the law mean that these have been eliminated. In exchange, the standard deduction has been doubled at all levels.
Try the Dependent Credits and Deductions Calculator
The good thing about trying to work all this out is online tax filing offers a dependent credits and deductions calculator.
All you have to do is answer a few questions and enter some basic information to find out whether the person in question qualifies for the new exemption and how much you qualify for.
Update: This calculator reflects the latest IRS changes to dependent exemptions and tax credits.
What if you are divorced or separated and trying to claim a dependent exemption for your child?”
If you are divorced or separated, only one parent can claim the dependency exemption for the child.
The parent who claims the child as a dependent must have provided more than half of the child’s financial support during the year.
In addition, the custodial parent is usually the one who can claim the dependent exemption.
The custodial parent is the parent who the child lives with the majority of the time. If you are the custodial parent, you can claim the dependent exemption even if the other parent provides more financial support.
However, if you are not the custodial parent, you can only claim the dependent exemption if you provide more than half of the child’s financial support and the other parent agrees not to claim the child as a dependent.
Divorced or separated parents should try to come to an agreement about who will claim the dependent exemption for their child.
If you are unable to reach an agreement, you may need to consult with a tax professional or attorney.
Can I claim my spouse as a dependent?
You cannot claim your spouse as a dependent unless they are a qualifying relative. A qualifying relative must meet the following criteria:
- The relative must be related to you by blood, adoption, or marriage.
- The relative must be a U.S. citizen, national, or resident alien. The relative must live with you for at least half of the year.
- The relative must not provide more than half of their own financial support.
If your spouse meets all of the above criteria, then they should qualify as a dependent and you should be able to claim them on your taxes.
If your spouse does not meet all of the criteria, you cannot claim them as a dependent.
Can I claim my boyfriend as a dependent?
No, you cannot claim your boyfriend as a dependent unless he meets the criteria for a qualifying relative. In order to claim someone as a dependent, they must be related to you by blood, adoption, or marriage.
Additionally, the dependent must be a U.S. citizen, national, or resident alien and they must live with you for at least half of the year.
Finally, the dependent must not provide more than half of their own financial support. Unless your boyfriend meets all of these criteria, you cannot claim him as a dependent on your taxes.
Can a dependent file taxes?
No, a dependent cannot file taxes. A dependent is someone who relies on another person for financial support.
Dependents are not required to file their own taxes because they are not considered to be taxpayers. Instead, the person who is providing the financial support (known as the “claimant”) will claim the dependent on their own tax return.
IRS Dependent Exemption Requirements
The IRS Publication 501 has practically every conceivable situation for working out whether someone would qualify for an exemption.
First of all, if your child meets the age requirements mentioned above, they will qualify. The same goes for stepchildren and adopted children.
The definition of a relative is important, but generally, anyone from a cousin to a grandparent will qualify.
Keep in mind that a relative can be claimed once per year on someone’s tax return.
How to Claim the Dependents Exemption
Claiming the deduction for qualified dependents is one of the best tax benefits available. It can open the door to many tax credits and deductions that can lower your tax bill.
Online tax filing software will ask you simple, plain-English questions about your family and will determine for you who qualifies as a dependent on your tax return, so you can be sure you’re getting the biggest refund possible.
Frequently Asked Questions
The rules provided by the IRS are designed to cover a broad array of situations and scenarios. As a result, it can be challenging to understand exactly how a dependent exemption applies to your specific situation.
Here are some commonly asked questions about whether someone qualifies as a dependent for tax purposes.
Question: My 25-year-old son lives with me full-time. He works full-time and earned more than $4,300. Would it be possible to claim him as a dependent?
Answer: No, because your son would not meet the age test. Qualifying children must be under the age of 19 or the age of 24 if they are a full-time student for at least five months of the year.
He would also not be eligible to be claimed as a qualifying relative because he earned more than $4,300.
Question: If I started work in September, but I had a baby in March, is my baby eligible to be claimed as a dependent on my tax return?
Answer: Yes. If your baby were born before January 1st, you would be able to claim them as a dependent for that tax year.
Question: I live with my partner, who fully supports me, while we reside in his parent’s house, but my partner pays all the household bills.
Can my partner’s parents claim us as dependents? If so, who can claim the deduction?
Answer: If your partner is unmarried and supplies over half of your support, and you have lived with him for the entire year and didn’t earn more than $4,300, your partner could claim you as a dependent.
His parents could not claim you as a dependent because they did not contribute more than half of your support.
Take note; you need to check your state’s laws regarding claiming a boyfriend or girlfriend as a dependent because some states do not comply with Federal laws on this matter.
Question: My spouse has only worked for one month of the year. Can I claim them as my dependent?
Answer: A spouse cannot be claimed as a dependent. However, in this situation, if you file as married filing jointly, there may be other tax benefits available to you.
Help at Tax Time
It can be difficult to know who qualifies as a dependent for tax purposes as everyone’s situation is different.
However, with TurboTax, you do not need to be aware of the complex rules.
Instead, the tax software will ask you a series of simple questions to determine whether you can claim someone as a dependent.
If your situation is more complex, you can take advantage of TurboTax Live and speak to a qualified tax expert with an average of more than a decade’s worth of experience.
They are available in English and Spanish, 24/7, throughout the entire year. You can even get a TurboTax tax professional to prepare, review, and file your tax return for you virtually.