Definition of a Dependent for Tax Purposes

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Discussion
There are two main types of dependents under the Internal Revenue Code: (1) a qualifying child; and (2) a qualifying relative. As the classification of a qualifying child has been explored in a separate post, this article will focus on the qualifying relative classification. To meet the definition, the following criteria must be met:

1. The dependent must be a U.S. citizen, a U.S. national, a U.S. resident, or a resident of Canada or Mexico.
2. The dependent cannot be claimed on another tax form.
3. The dependent cannot be a qualifying child.
4. The dependent must live with the taxpayer or be a child, sibling, parent (ancestor), nephew/niece, or uncle/aunt of the taxpayer.
5. The dependent must earn less than $4,050 (2017).
6. The taxpayer must provide over half of the dependents financial support.

The benefit for claiming a dependent for 2017 is an additional exemption ($4,050 deduction against taxable income) as well as the child tax credit in the case of a qualifying child. For 2018, exemptions have been effectively repealed with the passing of the new tax bill. Although the child tax credit has been increased for taxpayers able to claim a qualifying child, there is no benefit (besides potentially claiming head of household) for claiming a qualifying relative.

References
https://www.irs.gov/pub/irs-pdf/p501.pdf

Disclosure
Any accounting, business or tax advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.