When it comes to your tax liability, claiming a dependent on your tax return may result in all the difference. By adding a tax dependent, you may be able to lower your taxable income and tax liabilities by becoming eligible for tax advantages like the child tax credit and the child as well as tax dependent care credit.

In addition, should you choose to file as a single filer, you have a chance to do so under the more favored head of residence filing status. You must confirm that a person satisfies all Internal Revenue Service (IRS) rules for a dependent before reporting them as one on your tax repayment.

Who is a Tax Dependent?

A tax dependent is defined as someone who is eligible to be declared by another person on a tax return and who is other than the taxpayer or spouse for financial reason. A dependent is a person who is financially dependent on another person. This usually applies to your kids or other family members. It can also refer to those who are not your blood relatives, such as domestic partners. You notify the Internal Revenue Service (IRS) that you satisfy the requirements to claim someone as a dependent when you list them as such on your tax return.

Declaring Children as Tax Dependents

To help you in determining whether you have a qualified child or family, the IRS has developed a few rules. In order to be identified as a qualifying child, a dependent must pass each of the six tests listed below.

Citizenship Test

It requires that a qualifying kid be a citizen or resident alien of the United States, a national of the United States, or a resident of Canada or Mexico. When an adopted child lives with you in your home for the entire year while not being a citizen of the United States, there are exceptions.

Relationship Test

A natural child, an adopted kid, a stepchild, or an approved foster child are all considered children under the IRS's standard definition. In addition, a stepsibling, sibling, half-sibling, or a relative of any of the above can also qualify as a child.

Residency Test

For a child to be eligible, they must share the taxpayer's residence for more than fifty percent of the year. Temporary absences are an exception. An eligible child will still pass the residence test even if they are away from home for work, school, vacation, a child custody arrangement, a medical condition, duty in the military, or other reasons.

Age Test

A qualified child must be enrolled full-time in school for at least five months of the year, be under the age of 19, or be under the age of 24. A person who is completely and permanently disabled has no age restrictions. Additionally, the child must be younger than you or your partner if you file a joint return unless they are totally and permanently incapacitated.

Support Test

This test states that the person claiming assistance must have paid for more than 50% of their own support. You must be able to substantiate your claim if you're attempting to claim someone who works and takes care of oneself only to a certain extent.

Joint Return Test

It states that a dependent does not qualify as a qualifying kid if they are married and file a joint return with their partner. This rule only applies if the spouse and dependent are exempt from filing taxes and are doing so merely in order to receive a refund.

Criteria for Selecting an Eligible Child

In cases where two taxpayers have qualifying children, the IRS developed a tie-breaker rule which should be applied to decide which taxpayer is eligible to claim the tax advantages. The child will be the parent's qualifying child if there is just one taxpayer who is the child's parent. In the event that both taxpayers are the child's parents and do not go for a combined tax return, the parent who can declare the child is the one whom the child stayed with for the most extended period.

The parent with the greatest adjusted gross income, if the child spent the same length of time with both parents, is eligible to receive the tax advantages.

Declaring Family Members as Tax Dependents

Even if a dependent doesn't fit the definition of a qualifying child, they could still be eligible for specific tax benefits provided they pass additional requirements and tests established by the IRS. A qualifying relative must additionally fulfill the following four requirements in addition to passing the citizenship and joint return tests.

Qualifying Child Test

A person must not be an eligible child for anyone else to qualify as a relative. In other words, a dependent is only considered a qualifying relative if they fail to meet the requirements for qualifying as a kid for you or another taxpayer.

Member of Household or Relationship Test

An uncle, aunt, father-in-law, your spouse's mother's sibling, stepsibling, grandchild of a sibling, parent or stepparent, progenitor of a parent, or any combination of these can be considered a qualifying relative. You are not required to live with these relatives. Alternatively, a person who resides with the taxpayer for the full year, whether or not they are related to the taxpayer, may qualify as well.

Support Test

A dependent must have received over fifty percent of their support from the taxpayer in order for them to qualify as a eligible relative. Remember that the support test for a qualified child differs from the test for an eligible relative. If a qualifying relative is a kid, the taxpayer must demonstrate that the qualifying relative contributed more than half of the dependent's care; if a qualifying relative is a relative, the taxpayer must demonstrate that the dependent provided half or less of their support.

Conclusion

To sum up, tax dependents are typically defined as children, family members, or even non-family members who depend on the taxpayer for financial assistance. There are requirements for children to be eligible. Relatives and other dependents are subject to a number of standards concerning support, income, and relationships. If a taxpayer meets these requirements, they are eligible to be claimed on their tax return.