The tax rules for dependents are intricate, and they changed somewhat in 2018 when the Tax Cuts and Jobs Act (TCJA) went into effect. Whom can you claim as a dependent on your tax return? Can you claim your child if you're divorced? What about your elderly mother? It depends—the qualifying tests for each are somewhat different.
Here's what you need to know about claiming dependents for the 2020 tax year.
Personal Exemptions Suspended
As a result of the TCJA, personal exemptions are not available for taxpayers in the 2020 tax year. Barring further legislation, personal exemptions may return in 2026 as parts of the TCJA expire.
The Basic Rules for Claiming Dependents
Personal exemptions aren't the only reason to claim a dependent, so the rules concerning who qualifies to be claimed still apply. Depending on your situation, you may be able to claim dependents to receive a tax credit or otherwise qualify for more favorable tax treatment.
These rules can vary a little for different tax credits, so make sure you understand the exact dependent rules for each one you hope to claim. These qualifiers give a general overview.
There are two kinds of dependents: qualifying children and qualifying relatives. The rules are slightly different for each.
- The support rule: You must provide more than half your qualifying relative's support needs for the tax year, and your qualifying child can't provide more than half their own support if they work or otherwise have income.
- The relationship rule: A qualifying child must be related to you, although not necessarily by blood. Adopted children, stepchildren, foster children, siblings, stepsiblings, half-siblings, or the children of any of these individuals all qualify.
- The residence rule: Your qualifying child must live in your home for more than half the year. Some qualifying relatives must live with you all year, while others don't have to live with you at all—subject to still more rules.
- The age rule: Your qualifying child must be younger than you and younger than age 19 on the last day of the tax year unless they're a full-time student (then the age limit extends to 24). There's no age limit if the child is permanently and totally disabled.
- The income rule: Qualifying relatives can't have a gross income of $4,300 or more in the 2020 tax year. This limit can increase periodically to keep pace with inflation. There aren't any income limits for qualifying children, but again, they can't use their own money to pay for more than half their own support.
Some Other Rules
No taxpayer can claim a child as a qualifying relative if someone else can claim the child under the definition of a qualifying child.
The relationship between yourself and your qualifying relative dependent can be important because of the residency factor. Some relationships have mandatory residency requirements. Your dependent must actually live with you throughout the entire year. Other relatives, such as your parents, don't have to live with you at all, but you must still pay for more than half their living expenses elsewhere.
If you need help determining whether you can or should claim someone as a dependent, have every person who could claim them sit down and discuss the issue before anyone files their tax returns. More than one taxpayer claiming the same individual as a dependent will inevitably invite at least a correspondence audit from the Internal Revenue Service (IRS).
Can Any Relative Claim a Child as a Dependent?
Maybe you and your ex have a child together. You pay child support, and you provide your child with health insurance. Your ex has custody, but they don't work, so they let their mother claim the child as a dependent to offset some of the mother's taxable income. Is this allowed?
Remember, the child must live with you for more than half the year for you to claim them as a dependent, so you wouldn't personally be able to claim them if they didn't live with you for more than six months, even if you pay child support and help with other financial needs. You're eliminated from qualifying, so anyone else claiming your child is irrelevant to your personal tax situation.
Your ex's mother might well be able to claim your child as a dependent as long as the child meets the tests for a qualifying child. Grandchildren are covered under the rule that says the child must be related to the taxpayer in some way, but you have to look at the other criteria as well. Your child must have lived with their grandmother for more than half the year, and they must be under age 19 (or age 24 if they're a full-time student).
So, did your child live with your ex or with your ex's mother? If your child lived with both of them equally, only your ex would be able to claim your child as a dependent using the IRS tiebreaker tests, because being the parent trumps all other relationships.
The tax code doesn't care if your child was born on January 1 or December 31. They can be your dependent as long as they were born at any time during the tax year.
Child Dependents and Head-of-Household Filing Status
Having a child who meets the rules as your qualifying child can qualify you for the advantageous head-of-household filing status, but claiming a dependent doesn't qualify you for the status in and of itself. This filing status requires that you have a dependent, but you would only be eligible to file as head of household if you also were to pay more than half the costs for your home during the tax year.
You must also be "considered" unmarried. This means that you're divorced, or you have never married as of the last day of the year, or you haven't lived with your spouse at any point during the last six months of the tax year.
When Parents Have 50/50 Joint Custody
As a practical matter, an exact 50/50 custody split is pretty much impossible except in leap years. There are 365 days in a year, so even if your child lived with each of you for exactly six months or 182 days, there's still that 365th day dangling out there, waiting to act as a tiebreaker. But it could change the equation if your child spent a portion of the year living with a third party. Maybe they spend 150 days with you, 150 days with your ex, and 65 days with their grandmother.
The IRS has a tiebreaker test for this situation when a child actually does live with each parent for exactly half the year. The parent with the higher adjusted gross income (AGI) gets to claim the child as a dependent in this case. Time is measured by overnights spent in each parent's home.
Can Your Parent Be Your Dependent?
Parents fall into the category of "qualifying relatives." You can claim your parent as a dependent, provided that they earned less than $4,300 in gross income in the 2020 tax year. Social Security doesn't count as taxable income in this circumstance, even though some portion of that income might end up being taxable to your parent when they prepare their own tax return.
Your parent doesn't actually have to live with you, either, because there is no residency requirement for parents. However, you must provide more than half their total financial support.
The IRS Can Help Determine Your Situation
The IRS offers an interactive tool on its website to help you determine for sure whether your child or relative qualifies as your dependent. The quiz takes about 15 minutes and will provide you with an answer.
The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the laws. For current tax or legal advice, please consult with an accountant or an attorney.