Specific Areas of Impact For Dependents
It is important to be aware of the specific areas of impact that can be affected by claiming dependent(s) on your taxes. Several tax attributes -- the Dependency Exemption, the Child Tax Credit (CTC), the Dependent Care Credit, and the Earned Income Tax Credit (EITC) -- are impacted by the “Uniform Definition of a Child.” The table below highlights the special requirements associated with each attribute followed by a discussion of each.
Multiple Support Agreement
The rules relating to multiple support agreements do not apply with respect to qualifying children because the support test does not apply to them. Learn more about how a multiple support agreement can impact your tax benefits in the following example.
Taxpayers can apply dependency rules to claim a dependency for a qualifying relative who does not satisfy the qualifying child definition. In such cases, gross income, and support tests, including the special rules for multiple support agreements, the special rules relating to income of handicapped dependents, and the special support test in case of students, apply for purposes of the dependency.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is available to taxpayers who make under a certain threshold annually. In some situations, parents and caregivers are eligible to receive the EITC as the result of a qualifying child. In these cases, certain criteria must be met.
A qualifying child must be a qualifying child under the dependency rules (except for the requirement that the child not provide more than one-half of his or her own support). If a taxpayer claims the earned income tax credit based on a qualifying child, the child must have a Social Security number. The same tie-breaker rules apply for the EITC as for dependency.
Child Credit (CTC)
The child tax credit is popular among American families but it is important to be aware of the fact that it is not available to every household. To ascertain whether or not your family is eligible for the credit, read the following details.
A qualifying child for the child tax credit (CTC) is defined the same as for determining dependency, except the child must be under age 17 (18 for 2021 only), regardless of whether the child is disabled, and a taxpayer cannot claim a child for the child tax credit unless the taxpayer is entitled to the child’s dependency. For years 2018 through 2025, the ID number of the child must be a Social Security number and the SSN must be obtained before the due date of the return.
If the child doesn’t meet the requirements to be a qualifying child but is eligible to be a qualifying relative (i.e., “other dependent”), the taxpayer may claim the $500 nonrefundable dependent credit instead of the child tax credit.
Dependent Care Credit
To receive the dependent care credit, the IRS requires both a taxpayer and his or her dependent to meet certain eligibility requirements.
If other applicable requirements are satisfied, a taxpayer may claim the dependent care credit for a child who lives with the taxpayer for more than one half of the year, even if the taxpayer does not provide more than one half of the cost of maintaining the household.
Head of Household Filing Status
A taxpayer is eligible for head of household filing status only with respect to a qualifying child or an individual who qualifies as the taxpayer’s dependent (qualifying relative). Thus, a taxpayer may claim head of household filing status if the taxpayer is unmarried (and not a qualified widow(er)) and pays more than one half of the cost of maintaining as his or her home a household which is the principal place of abode for more than one half the year of:
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A qualifying child, or,
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An individual who is a relative the taxpayer may claim as a dependent.,
A taxpayer cannot claim head of household status using as a qualifier an individual who is the taxpayer's dependent only because the individual is part of the taxpayer's household. Thus, the taxpayer and qualifying individual must be related. A taxpayer may claim head of household status with respect to a parent who qualifies as the taxpayer’s dependent even if the parent does not live with the taxpayer if certain requirements are satisfied.
Birth or Death of Qualifying Dependent
In some cases, a taxpayer only meets head of household filing requirements due to a dependent residing with him or her. If the dependent in question is born or passes away during the tax year, questions may arise about whether or not head of household filing status is still allowed.
The head of household filing status may be claimed even if the person qualifying the taxpayer for the head of household status was born or died during the year if:
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The qualifying child or qualifying relative lived with the taxpayer for more than half the part of the year the child or relative was alive.
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The taxpayer paid more than half the cost of keeping up their parent’s home for the entire part of the year the parent was alive.
Example: Amy is unmarried and claims her mother, Sue, as a dependent. Sue, who lived by herself in an apartment and had no income, died on September 2. Until her death, the cost of upkeep of the apartment was $6,000, of which Amy paid $4,000 and Amy’s brother paid $2,000, his only contribution to Sue’s support. Because Amy paid more than half of the cost of keeping up Sue’s apartment from Jan. 1 until Sue’s death, and Amy can claim Sue as a dependent, Amy can file as head of household.
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