CAN I CLAIM MY SON (OR DAUGHTER)?

As a veteran tax professional with 44 filing seasons under my belt and tax blogger one question I am often asked by clients, readers, and cocktail party guests is “can I claim my son, or daughter?”.

In order to be claim someone as a dependent on your tax return that person must be either a “qualifying child” or a “qualifying relative”. 

A qualifying child includes your child by birth, stepchild, or a foster child who is placed with you by an authorized agency or by judgment, decree, or other court order.  A child you have legally adopted is treated as your child by birth.

He or she must be either under age 19 at the end of the year or under age 24 at the end of the year and a full-time student for any part, even 1 day, of 5 months during the year.  A child is enrolled in an online or correspondence school does not qualify as a full-time student.  

The child must live with you as a member of your household for at least 6 months of the year.  If the child is temporarily at another location for a specific reason, such as in a dorm at college or in military service, he or she is still considered to be living with you.

A child who was born or who died during the year is considered to have lived with you for the entire year.  There is no limitation on the number of days – a child who passes on January 1, 2014, or is born on December 31, 2014, can be claimed as a dependent.

And you must provide more than 50% the child’s support for the year.  

A qualifying child who is married can only be claimed as a dependent if he or she does not file a joint tax return with their spouse, unless the only reason for filing a joint return is to claim a tax refund.

If a child is the “qualifying child” of both parents, who are separated, divorced or unmarried, there are “tie-breaking” rules for determining who can claim the child as a dependent.  Generally the child is the dependent of the “custodial parent”, which is the parent with whom the child lives with for the greater part of the year.  What is comes down to is the number of nights during the calendar year that the child sleeps at a parent’s home. 

You may also be able to claim your son or daughter as a dependent as a “qualifying relative”.  This happens if the child is over age 19, or 24, and has gross taxable income of less than the amount of the personal exemption deduction, which for 2014 was $3,950 and for 2015 is $4,000.  Non-taxable income, such as SSI or non-taxable Social Security or Railroad Retirement benefits, do not count toward the $3,950 or $4,000. 

In this situation the child does not have to live in your home as a member of your household, but you must provide more than 50% of his or her support.

Here are some examples, all assuming you provide more than half of the son or daughter’s support –

Your son, age 20, is a junior in college who lives away at school most of the year.  He has a summer job and earns $6,000 in W-2 wages.  You can claim him as your dependent.

Your 25 year-old daughter is in medical school.  She does not work and has no taxable income other than interest, dividends, and capital gains that total less than $1,000 for the year.  You can claim her as a dependent.

Here is a real-life example from my mentor’s practice.  Your 40+ year old son lives with you.  He does not work and has no income.  He basically lives off you.  You can claim him as a dependent.

How much tax will you save by claiming your child as a dependent?  Depending on your situation the savings can be substantial.

In addition to claiming an additional personal exemption – a $4,000 exemption will save $1,000 in federal tax for taxpayers in the 25% bracket – based on your level of income and the child’s age you may also be able to take advantage of the Child Tax Credit, Child and Dependent Care Credit or exclusion of child care benefits paid through a flexible spending account (FSA), and the Earned Income Tax Credit. 

The tax savings for having a dependent child, or the tax cost of losing a dependent, is much more substantial for a single parent with one child.

In order to be able to claim the tax-advantaged Head of Household filing status you must pay more than half of the cost of keeping up your home, which is the principal residence for more than 6 months of your qualifying child or qualifying relative.  A qualifying child does not have to be claimed as a dependent – a custodial parent can “release” the dependency exemption to the non-custodial parent – but a qualifying relative must be claimed a dependent.

So, as with just about every tax question, the answer to “can I claim my son, or daughter?” is “it depends”.

TTFN