Tax Rules for Claiming Adult Dependents

Do you know what qualifies someone as a dependent?

Image shows a younger woman helping an older woman filling out her tax forms. Text reads: "Tax rules for claiming adult dependents: needs to be qualifying relationship; resides with you (unrelated adult); follows state laws; meets income rule; meets the 51% rule; has social security number"

Image by July Bang © The Balance 2020

Having one or more dependents opens the door to be able to claim multiple tax breaks, and it increases the benefits of others. The value of this tax provision is somewhat less than it's been in previous years, at least from 2018 through 2025 while the Tax Cuts and Jobs Act (TCJA) remains in effect, but the TCJA also provides an additional tax break for adult dependents through this time period.

A taxpayer’s dependents don’t necessarily have to be children. You can claim certain adults as your dependents, too, but that is subject to a lot of rules.

Defining Dependents for Tax Purposes

The IRS definition of a dependent is rather vague and it’s temporarily outdated, thanks to the TCJA. It’s someone “other than the taxpayer or spouse” who qualifies the taxpayer to claim a dependency exemption. In practical terms, it’s someone who literally “depends” on the taxpayer for support, and multiple IRS rules determine whether this is indeed the case.

All dependents are either qualifying children or qualifying relatives other than a spouse, and they’re subject to varying requirements depending on which category they fall into.

Dependents and the Tax Cuts and Jobs Act

The TCJA eliminates the personal exemptions you could once claim for yourself and each of your dependents of any age—$4,050 per person off your taxable income in 2017, the last year in which these exemptions were available. They're slated to return in tax year 2026.

In the meantime, you can still benefit from claiming dependents because having them can make you eligible for other tax perks, including the advantageous head of household filing status and the Child and Dependent Care Tax Credit. And the TCJA adds a tax credit for non-child dependents from 2018 through 2025.

The Credit for Other Dependents

Known as the "Credit for Other Dependents," this is the additional tax credit provided under the TCJA. It used to be that you could only claim the Child Tax Credit for each of your minor dependents. They had to be age 16 or younger as of the last day of the tax year.

You can still claim the Child Tax Credit for your younger kids, but your 17-plus-year-olds are no longer left out in the cold as long as they qualify as your dependents. The TCJA offers the Credit for Other Dependents for dependents over age 16.

Your dependent doesn’t have to be your child to allow you to claim this credit. They can be your parent, sibling, or cousin—or not be related to you at all. They must meet all the other IRS qualifying rules for adult dependents, however. The credit is $500 per dependent as of 2020.

What Qualifies Someone as a Dependent?

All dependents must be U.S. citizens, nationals, resident aliens, or residents of Canada or Mexico. They can’t file a joint return with a spouse if they’re married, unless it’s solely for the purpose of claiming a refund because they owe no taxes. 

Dependents can’t claim dependents of their own. These rules apply to all dependents, but other rules apply separately to qualifying children or relatives.

The Relationship Rule

You must have a qualifying relationship with your would-be dependent. The individual must be either a close relative or must live with you.

Qualifying relatives include siblings, half-siblings, and step-siblings. They also include your parents, stepparents, grandparents, and even great-grandparents. Nieces, nephews, aunts, and uncles can all be your dependents, and your in-laws are covered by this rule, too.

Your in-laws don’t lose their potential status as your dependents if your spouse dies or you divorce.

Your adult son or daughter might also qualify as your dependent if you continue to support them—they're just no longer your “qualifying children” if they're older than age 19, or age 24 if they're a student. They become “qualifying relatives" instead.

All these related individuals can be your dependents without actually living with you, but unrelated adults must reside in your home. The relationship can be with either you or your spouse if you file a joint return.

Your relationship with an unrelated dependent can’t be against the law in your state. For example, you might live with your significant other and meet all the other rules, but your living arrangement might be considered illegal if they’re married to someone else. You couldn’t claim them as a dependent as a result.

The Income Rule

There must also be a good reason why your would-be dependent is costing you so much money, namely that they earn very little money of their own. 

Their total taxable income from all sources must be less than the personal exemption amount for the year in which you want to claim them. The TCJA retains the exemption amount for purposes of qualifying for other tax breaks even though personal exemptions have been temporarily eliminated from the tax code. It’s $4,300 beginning in 2021.

You must look at your potential dependent’s gross income—what they earned before taxes. This includes unemployment compensation, although not Social Security income that’s not taxed. It can include public assistance.

The Support Rule

Even assuming that your dependent meets the income rule, what they do with their money also matters. The support rule requires that you provide at least 50.01%—more than half—of their support.

Let’s assume that your sibling earned $4,000 last year, so they come in just under the wire on the income test. They rent a room in someone’s home and their entire monthly living expenses are $500, or $6,000 a year. They use their entire income to pay these expenses and you kick in the $2,000 balance.

They’re not your dependent. They can’t qualify even though they’re a relative who doesn’t have to live with you, and even though they earn less than the personal exemption for the year, because you’ve contributed just one-third to their support. 

Your contribution would come out to $8,000 a year—more than half—if their monthly living expenses are $1,000 a month or $12,000 a year, and if they contribute the entirety of their $4,000 income and you pay the rest. 

So far, so good. They still qualify as your dependent.

Keep receipts for other expenses you pay for directly on your dependent’s behalf. In addition to lodging and groceries, expenses that count as support under IRS rules include medical care, dental care, transportation, and clothing.

Multiple Support Agreements

The support that your would-be dependent receives from others counts, too. Maybe you have two other siblings and they both kick in some money every month to help the one who’s down on their luck. Your personal contribution must still be 51% or more unless they sign Form 2120, the Multiple Support Declaration, letting you claim the dependent regardless of their contributions.

A Multiple Support Agreement often comes into play when siblings pool their money to support elderly parents. The agreement simply states the consent of the others to not claim the individual in question as a dependent. You must still contribute a minimum of 10% to their support, but this is considerably less than the 51% rule.

The Bottom Line

Yes, these rules are complicated. The IRS anticipates that many taxpayers will have problems trying to figure out who they can claim and who they can't, so it provides an interactive tool on its website to help you along. Answer some questions and the tool will give you a yes or no answer. The process takes less than 15 minutes.

Article Sources

  1. Internal Revenue Service. "Five Things to Remember About Exemptions and Dependents for Tax Year 2017." Accessed Nov. 23, 2020.

  2. Internal Revenue Service. "You May Benefit From the Credit for Other Dependents." Accessed Nov 23, 2020.

  3. Internal Revenue Service. "Revenue Procedure 2020-45." Page 16. Accessed Nov. 23, 2020.