top of page
Search
  • Fullah Kamara

Understanding Dependents: Qualifying Children and Qualifying Relatives

Introduction:

When it comes to tax benefits, understanding the concept of dependents is crucial. The Internal Revenue Code (IRC) recognizes two types of dependents: qualifying children and qualifying relatives. In this blog post, we will delve into the requirements and tests for each category, shedding light on the key factors that determine who can be claimed as a dependent.

Qualifying Child:

To qualify as a qualifying child, an individual must pass the SARR tests, which stand for Support, Age, Relationship, and Residence. Let's break down each test:


Support Test: A qualifying child must not be self-supporting, meaning they should not provide more than half of their own support. Support includes various necessities such as food, shelter, clothing, medical and dental care, education, recreation/toys, transportation, and similar items. It's important to note that scholarships received by full-time college students are not considered as support.


Age Test: A qualifying child must be under the age of 19 by the end of the tax year, or under the age of 24 if they are a full-time college student. Additionally, a full-time college student must have been in school for at least five months of the year. The qualifying child must also be younger than the taxpayer claiming them as a dependent.


Relationship Test: The relationship test include various family connections such as the taxpayer's child (son or daughter), adopted child, stepchild, eligible foster child, sibling, half-sibling, step-sibling, and descendant of any of these parties (grandchild, nephew, niece). However, uncles, aunts, and in-laws such as son-in-law and brother-in-law are not included.


Residence Test: A qualifying child must live with the taxpayer for more than half of the tax year. Temporary absences due to vacation, school, or medical reasons are disregarded.


Tiebreaker Rules: In cases where a child could be considered a qualifying child for more than one person, the tax law specifies tiebreaker rules. These rules determine who has priority in claiming the child as a dependent. The parent is given priority, and if both parents are claiming the child, the one with the longer period of residence prevails. If none of the claimants are parents, the one with the higher Adjusted Gross Income (AGI) prevails.


Qualifying Relative:

Apart from qualifying children, a qualifying relative can also be claimed as a dependent. A qualifying relative must pass the RGS tests, which stand for Relationship, Gross Income, and Support.

Relationship Test: The relationship test for a qualifying relative is more expansive than that for a qualifying child. It includes collateral ascendants (uncles and aunts), lineal ascendants (parents and grandparents), and certain in-laws. Additionally, individuals who are members of the household, whether related or unrelated, can be considered qualifying relatives. However, cousins are not included unless they are "members of the household."


Gross Income Test: A dependent's gross income must be less than the exempt amount, which is $4,700 in 2023. Gross income includes taxable income, including the taxable portion of scholarships (source: https://answerconnect.cch.com/topic/4dc7fb0c7c6b1000b63590b11c2ac4f102/personal-and-dependency-exemptions).


Support Test: The taxpayer must provide more than half of the qualifying relative's support. Similar to the support test for qualifying children, support includes various expenses. However, scholarships received by full-time students are not counted as support. Capital expenditures, such as furniture or appliances, are included if they contribute to the individual's support.


Multiple Support Agreements: In cases where multiple individuals collectively provide more than 50% of the support for a dependent, a multiple support agreement allows them to designate one member of the group to claim the individual as a dependent. Any taxpayer contributing more than 10% of the support is entitled to claim the dependent.


Children of Divorced or Separated Parents: Special rules apply to children of divorced or separated parents. The custodial parent is generally entitled to claim the dependent, but the custodial parent can sign a waiver (form 8332) allowing the noncustodial parent to claim the child as a dependent. This waiver must be attached to the noncustodial parent's tax return.


Other Rules for Determining Dependents: In addition to fitting into either the qualifying child or qualifying relative category, a dependent must meet the joint return and citizenship tests. The joint return test prevents someone who files a joint return with their spouse from being claimed as a dependent. However, the joint return rule does not apply, if the reason for filing is to claim a refund for tax withheld and no liability exist. The citizenship test requires the individual to be a U.S. citizen, U.S. resident, or a resident of Canada or Mexico for some part of the calendar year. (source: https://apps.irs.gov/app/vita/content/globalmedia/4491_dependency_exemptions.pdf)


Key Takeaway:

Relationship Tests: The qualifying relative category is broader than the qualifying child category. In addition to including relatives identified under the qualifying child grouping, other relatives can be considered. Furthermore, nonrelated individuals who are members of the household can also be included in this category.

Support Tests: The support tests for qualifying child and qualifying relative differ. For a qualifying child, it is important that the child is not self-supporting.

Income and Age Limitations: The qualifying child category does not have a gross income limitation, meaning there is no restriction based on the child's income. On the other hand, the qualifying relative category does not have an age restriction, which means individuals of any age can be considered as long as they meet the other requirements.


Conclusion:

Understanding the criteria for qualifying children and qualifying relatives is essential when determining dependents for tax purposes. By familiarizing yourself with the SARR and RGS tests, as well as other rules such as tiebreaker rules and multiple support agreements, you can ensure accurate and eligible claims. Always consult the most recent tax guidelines or seek advice from a tax professional for specific situations and up-to-date information.

Remember, the rules for dependents change over time, so staying informed is key.

4 views0 comments

Comments


bottom of page