Some taxpayers are of the perception that they can only claim their own children on their tax returns, as legitimate dependents. Taxpayers, however, can also claim on as dependents, other persons who they support financially. Under tax law, these persons may qualify to be their “Qualified Relatives.” This person has to be someone who you actually supported financially for the tax year in question, but there are four basic tests that must be satisfied, to determine if you are eligible to claim that individual as your qualifying relative.
These tests are as follows:
- The member of household or relationship test.
- The gross income test.
- The support test.
- The citizenship test.
The Member of Household or Relationship Test
For you to claim a person as your Qualifying Relative, that person must either be (a), related to you by blood or marriage, or (b), be a member of your household for the entire year, with no blood relationship necessary.
(a) Persons related to you by blood or marriage can include any of the following: your adult child, adult stepchild, eligible foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, father, mother, grandparent, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law, or a descendant of any of these.
It is important to note that qualifying relatives who are fall into any of the above categories, do not have to live with the taxpayer. As long as you meet the other three tests noted above, you can claim any of these qualifying relatives as a dependent on your tax return. Also, relationships established by marriage do not end if there is death or divorce. So, for example, if you support your mother-in-law, you can still claim her as a dependent even if you and your spouse are divorced.
(b) You may claim as a dependent on your tax return, any person who is a member of your household, even though that person is not related to you by blood or marriage, as long as the conditions below are met:
- The person must be a member of your household, and
- The person must have lived with you for the entire year, and
- The relationship between you and the person must not violate local law.
This in essence means that you may be able to claim a cousin, friend, boyfriend or girlfriend, or domestic partner, as a dependent under the qualifying relative tests. These persons, however, must live with you for an entire year, and must meet all the other criteria noted above for qualifying relatives. Note also that your adult child who does not qualify to be a qualifying child (over 19, and not in college, or over age 24) can be your qualifying relative, if all the other conditions are met.
One very important point to note is that a person who is your qualifying relative only because he or she lives with you all year as a member of your household (not related to you), cannot qualify you to claim the Head of Household (HOH) filing status. For example, your girlfriend or boyfriend, who lives with you, or their children, cannot qualify you for the HOH filing status. You may, however, claim the dependent exemption if they lived with you for the entire year, and all the other tests are met.
The Gross Income Test
In order to claim a person as a qualifying relative, he or she cannot have a gross income for the tax year (2017) in excess of $4,050 (the amount of one dependency exemption). This rule holds true even if you provided most or all of that person’s support. Gross income is defined as all income received in the form of money, property, and services that are not exempt from tax. Gross income includes unemployment compensation and certain scholarships, but does not include welfare benefits and nontaxable Social Security. Also, if your relative’s income includes income from rental property, you must treat total receipts as gross income, you cannot deduct taxes, repairs, etc.
The Support Test
Because a dependent is perceived to be someone you support, it would stand to reason that the dependent should not be making enough money to support himself or herself. The support test is met if you can prove that you provide more than half of a person’s total support for the entire year. Support includes amounts you spent to provide food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities for your dependent. Note that any state amounts received, such as welfare, food stamps, and housing, are considered provided by the state, and not by you, so these should not be included in the calculation.
In figuring the support you provided, you must compare the amount you contributed to the person’s support with the total amount of support the person received from all other sources. This includes the person’s own funds used for support. A person’s own funds are not counted towards his support unless they are actually spent for support. Also, in figuring a person’s total support, you should include tax-exempt income, savings, and borrowed amounts used to support that person.
The Citizen Test
For a person to qualify as your qualifying relative, that person must be a citizen or resident alien of the United States, Canada, or Mexico.