The IRS dependent exemption is aimed at taxpayers who need to pay for dependents. Most commonly, parents would apply for this because they have children. However, it also applies to other dependents.
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’re going to look at what this exemption is, how much it’s worth, and how you can claim the dependent exemption.
Table of Contents
- 1 Who Qualifies for the Dependent Exemption on Your Tax Return?
- 2 Tests to Determine a Qualifying Child
- 3 Tests to Determine a Qualifying Relative
- 4 How Much is the Dependent Exemption Amount?
- 5 Try the Dependent Credits and Deductions Calculator
- 6 IRS Dependent Exemption Requirements
- 7 How to Claim the Dependents Exemption
- 8 Frequently Asked Questions
- 9 How to File Taxes Online in 3 Simple Steps With TurboTax
Who Qualifies for the Dependent Exemption on Your Tax Return?
There are several credits and deductions related to dependents in your household. Under the tax reforms initiated in 2017, the system has changed.
The original dependent exemption worth $4,050 is no longer available. However, other tax benefits, such as the child tax benefit, is still active. It is currently worth $2,000 for children and there is also an additional $500 tax credit for other dependents.
Working out who you can claim as a dependent on your tax return remains tricky. A qualifying child or a qualifying relative is a good rule of thumb to go by.
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. For children under 24 they only qualify if they were a full-time student 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.
Gross Income – The qualifying relative must have earned less than $4,300 during 2020.
Total Support – You must provide more than half of their total support throughout the year.
Member of Household/Relationship – The person, whether they be 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 about $4,000 for each qualifying child. However, changes to the law means that these have been eliminated. In exchange, the standard deduction has been doubled at all levels.
Now you need to apply for a dependent credit, such as the child tax credit.
Unfortunately, the restrictions have been tightened. The qualifying person must be 13 or under, or over 13 if they’re disabled. You must have some earned income for the year. There are also a variety of other dependent rules you need to take into account.
The new amount is worth either $500 or $2,000, depending on your circumstances.
For other dependents, their gross income must be under $4,150, and you must provide half their support to qualify.
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 must 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.
Take note that the restrictions are much lower, though, so someone who may have qualified for a substantial amount previously may no longer qualify.
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.
You can also qualify someone as a dependent person if they have lived in your house for the entire tax year.
Do keep in mind that only one 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 a large number of 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. It can be difficult to understand exactly how they apply 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 in 2020, 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 in 2020.
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 was 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.
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. The platform 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 decades’ 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.