When our children are young and utterly dependent on us, we generally have no question that we can claim them on our tax return as a dependent. As they get older, start working, and make a little money, we begin to wonder – when should I stop claiming my child as a dependent?
Up until age 19, if your kid lives with you (for more than half the year) and is not financially supporting themselves, it is most likely that you, as the parent, qualify to claim your kid as a dependent. If your child continues as a student, the same rules apply up to age 24. These individuals are considered “qualifying children” for tax purposes.
Once your child is over 23, or over 18 and not a student, it can get a little more complicated. For starters, there is an income limitation. Your child must make less than $4,400 for the year (in 2022) to be a dependent. Additionally, you must provide more than half of your child’s support for the tax year (support includes housing, food, education, medical care, insurance, and money for recreational activities), and your child must live with you all year. Children who meet these requirements are considered “qualifying relatives” for tax purposes.
Other qualifications your children must meet, regardless of whether they are a qualifying child or qualifying relative, are:
- They must be a U.S. citizen, U.S. national, U.S. resident, or resident of Canada or Mexico;
- They must not be claimed as a dependent on another taxpayer’s return; and
- They must not file a joint return (unless they only file to claim a refund of tax withheld).
Let’s look at some situations where you can and cannot claim your child as a dependent:
- My child lives with me, is 22, is not a student, and makes $5k/year, but I pay all the household expenses. Because your child is over 18 and not a student, they would not qualify as a “qualifying child,” but do they qualify as a “qualifying relative”? If you are paying all the household expenses, it probably seems only fair that you should be able to claim your child as a dependent. However, remember the income limitation for dependents who are “qualifying relatives” – they must make less than $4,400/year (for 2022). In this situation, you could not claim your child as a dependent because they do not meet the income test.
- My child lives with me, is 22, a full-time student, and makes $5k/year, but I pay all the household expenses. This situation seems like the one above, but the difference is that your child is a student. That difference qualifies them to fall into the “qualifying child” category. This means that there is no income limitation test. We need to confirm if your child is providing more than 50% of their support with their $5k/year. Since you are paying all the household expenses, it is unlikely that your child provides the majority of their support. If you confirm they do not provide over half of their own support, you could claim your child as a dependent.
- My child lives with me, is 22, a full-time student, pays me for rent and household expenses, and uses student loans to pay for their education and living expenses (the student loans are in their name). So here is another situation where your child might qualify as a “qualifying child.” The age requirement is met (they are over 18 but a full-time student), and they live with you, so the residency requirement is met; however, the support requirement is not met. Even though your child lives on student loans (which they use to pay for over half of their support), those loans are considered their funds for support (since the loans are in their name and they are legally obligated to pay them back). In this situation, you could not claim your child as a dependent because they pay more than half of their own support.
So, when should you stop claiming your child as a dependent? The answer, surprisingly, is fairly black and white. Contrary to popular belief, claiming a dependent on your tax return is not a choice but a qualification. To claim a dependent on your tax return (and all the credits that come with that dependent), your child must meet the set of requirements as listed at the beginning of this blog. If they meet those qualifications, you are entitled to claim your child as a dependent; if they do not, you cannot claim your child as a dependent.