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Dependent & Tax: How to Decide Whether to Claim Yourself…

March 18, 2014 : Mike Slack - The Tax Institute

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Editor’s Note: You may feel like an independent adult, but in the eyes of an IRS you could still be your parent’s dependent, and whether or not they claim you can have an effect on your tax return. Consider these scenarios and learn more about dependents & taxes. 

You: 18-24 years old, working or in college
Task: Filing a tax return
Questions: What the heck is a personal exemption? Am I still a dependent?

Think of a personal exemption as “claiming yourself.” You are not your own dependent, but you can potentially claim a personal exemption. This entitles you to a reduction of taxable income – up to $3,900 in 2013. However, you have to determine if you are eligible to take the personal exemption.

Can anyone else claim you as a dependent?

This generally would be your parent or guardian. Here are the criteria for being claimed as a dependent as a qualifying child:

  • You are the child, stepchild, foster child, sibling, stepsibling or descendant of another taxpayer
  • You lived with the taxpayer for more than half a year (there are some exceptions)
  • You are under 19 at the end of the tax year or are under 24 and a full-time student (at least five months) or are permanently and totally disabled
  • You did not provide more than one-half of your own support in the tax year
  • You are a U.S. citizen, resident, or national, or resident of Canada or Mexico
  • You are unmarried, file using the married filing separately filing status, or file a joint tax return with a spouse but the return is filed only to claim a full refund of all taxes paid and neither spouse would have a tax liability if separate returns were filed

You can also be dependent in other ways. You may be a qualifying relative if you lived in the same household and are related to the taxpayer in one of the following ways:

  • a child (includes biological and adopted children, plus descendants of either), foster child, stepchild, sibling, step-sibling, or half sibling
  • a parent, grandparent, father- or mother-in-law, stepparent, aunt or uncle, niece or nephew, brother- or sister-in-law, or son- or daughter-in-law

Additionally, all these criterial must be met:

  • The person who might claim you provided more than one-half of your total support
  • You earned less than $3,900 in 2013
  • You are a U.S. citizen, resident, or national, or resident of Canada or MexicoYou are unmarried, file using the married filing separately filing status, or file a joint tax return with a spouse but the return is filed only to claim a full refund of all taxes paid and neither spouse would have a tax liability if separate returns were filed

If you meet all of these criteria as a qualifying child or qualifying relative, you are a dependent. You cannot claim the personal exemption, even if the person who you are the dependent of doesn’t file with you listed as a dependent.

The IRS also provides an easy way for individuals to determine whether they can claim their own exemption on their website. See: Can I Claim My Personal and/or Spousal Exemption?

Should my parents claim me as a dependent?

So you can’t claim the personal exemption, but you qualify to claim certain credits– namely the American Opportunity Credit and Lifetime Learning Credit.

If your parent’s income is too high for them to benefit from these credits, it may be advantageous for them to not claim you on their tax return. In that situation, if they do not claim you as a dependent, you can claim the education credits on your return for your education expenses. The value of these education credits that you could then claim may be a greater value to you than the dependency exemption is to your parents.

Note that in this situation you would still not be able to claim the personal exemption.

Most importantly: make sure to discuss this with your parents before filing your returns so that everyone is on the same page. It is also advisable to speak with a qualified tax professional to determine which course is best for both you and your parents.

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Mike Slack - The Tax Institute

Mike Slack - The Tax Institute

The Tax Institute

Mike Slack, JD, EA, is a senior tax research analyst at The Tax Institute. Mike leads research teams focused on business and investment tax issues.

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