Dependents: Definition, Types, and Tax Credits

What Is a Dependent?

A dependent is a person who relies on someone else for financial support. Dependents can include children or other relatives. Having a dependent entitles a taxpayer to claim a dependency exemption on their tax return as long as the dependent meets the qualifying definition according to the Internal Revenue Service (IRS).

A taxpayer who can demonstrate that they have a dependent also may be able to use this filing status to qualify for certain tax credits.

Tests in the Internal Revenue Code (IRC) establish a person’s eligibility to be a taxpayer’s dependent for the purpose of dependency claims.

How Does Dependency Work?

A dependent may be a qualifying child or another qualifying relative. Dependency status is determined by IRC tests. To qualify for dependent status, three tests must be met for all dependents: the dependent taxpayer test, the joint return test, and the citizen or resident test.

Any person who may be claimed as a dependent by another taxpayer may not claim anyone as a dependent on their own tax return. Any person who filed a joint return (as a married person) cannot be claimed by anyone as a dependent on their tax return unless that dependent is filing a joint return only to claim a refund of tax that was withheld or paid as estimated taxes. Finally, to be claimed as a dependent, a person must be a U.S. citizen, U.S. resident immigrant, U.S. national, or a resident of Canada or Mexico.

If you are married and filing jointly, you and your spouse can both claim dependents and share any tax benefits. In the case of separate returns, whether you are married or not, only one taxpayer may claim a given dependent on their income tax return, which is particularly crucial in cases of dual custodial parents. Dependency claims of separated or divorced parents are resolved in favor of the custodial parent. In some cases, previously determined court decrees or a written declaration by the custodial parent may release the claim to the noncustodial parent.

Types of Dependents

Qualifying Child

Specific tests are used to determine if a dependent is a qualifying child or a qualifying relative. To meet the IRC relationship test—and be considered a qualifying child—the child must be:

• The taxpayer’s son, daughter, stepchild, foster child (placed by an authorized placement agency), or a descendant (for example, a grandchild) of any of them
• The taxpayer’s brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant (for example, niece or nephew) of any of them

To meet the IRC age test, the child must be:

• Under age 19 at the end of the tax year and younger than the taxpayer (or the taxpayer’s spouse if filing jointly)
• A full-time student under the age of 24 at the end of the year and younger than the taxpayer (or spouse, if filing jointly)

The resident and support tests are the final tests to determine if the individual qualifies as a qualifying child. To meet the resident test, the child must have lived with the taxpayer for more than half of the year; however, there are exceptions to this rule.

For example, if the child or the taxpayer is temporarily absent due to illness, education, business, vacation, military service, institutionalized care for a child who is permanently and totally disabled, or incarceration, then the child is still considered part of the residence (living with the taxpayer) during this time.

The support test requires that the child cannot have provided more than half of their own financial support during the tax year.

Qualifying Relative

If these tests are not met, the taxpayer may decide to see if the tests for a qualifying relative are met. These tests are slightly different and are applied only when the tests for a qualifying child are not met. Unlike a qualifying child, a qualifying relative can be any age.

A qualifying relative must meet the “not a qualifying child” test, the member of household or relationship test, the gross income test, and the support test. In addition, a child cannot be a taxpayer’s qualifying relative if the child is the taxpayer’s qualifying child (or is the qualifying child of any other taxpayer).

To meet the member of household or relationship test, the person either must live as a member of the taxpayer’s household all year or be related to the taxpayer. It is important to note that an adopted child is treated the same as a natural child and that any relationships established by marriage are not ended by death or divorce.

To meet the gross income test, the dependent’s gross income for the tax year must be less than the threshold amount. This amount changes every year. For the 2023 tax year (the tax return filed in 2024), it is $4,700; it increases to $5,050 for 2024.

Finally, to meet the support test, the taxpayer must have provided more than 50% of the person’s total support for the tax year. (This support test should be differentiated from the one for a qualifying child, which tests whether the child provided more than half of their own support for the year.)

Dependent Tax Considerations

Both being a dependent and having a dependent can impact your tax return, tax credits, and deductions.

Tax Credits for Dependents

If the IRC tests determine that you are a dependent, then you may be eligible for certain tax credits and deductions on your own tax return.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) is a refundable tax credit for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit a taxpayer receives depends on income and the number of children in their household.

The EITC is:

• $600 in 2023 (the tax return filed in 2024) for childless households, increasing to $632 in 2024
• $3,995 in 2023 for one child, increasing to $4,213 in 2024
• $6,604 in 2023 for two children, increasing to $6,960 in 2024
• $7,430 in 2023 for three or more children, increasing to $7,830 in 2024
  
  

Child Tax Credit (CTC)

For 2023 and 2024, taxpayers can claim a Child Tax Credit (CTC) of up to $2,000 for each child under age 18 if a taxpayer's income is not more than $200,000 (or $400,000 if married filing jointly). If the credit exceeds the total taxes owed, taxpayers will receive up to $1,600 (2023) or $1,700 (2024) of the balance as a refund through the Additional Child Tax Credit.

Child and Dependent Care Credit

You may be able to claim the child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work. The amount you receive is a percentage of the work-related expenses you paid to a provider for the care of a qualifying individual, and the percentage depends on your adjusted gross income (AGI).

The credit is capped at 35% of eligible expenses (for those that make less than $15,000 per year) up to $3,000 for one qualifying individual and $6,000 for two or more qualifying individuals.

Education Credits

The two education credits are the American Opportunity Tax Credit (AOTC) and the lifetime learning credit (LLC). If the taxpayer has a dependent who attends a higher education institution, then the taxpayer will be eligible to claim the education credits associated with the dependent.

The AOTC is a credit for qualified education expenses paid for an eligible student for the first four years of higher education. The LLC is for qualified tuition and related expenses paid for eligible students enrolled in an eligible educational institution.

The Bottom Line

A dependent is someone who relies on another individual for support, usually a child or other relative who is unable to take care of themselves. For tax purposes, dependents must meet certain qualifying tests: the dependent taxpayer test, the joint return test, and the citizen or resident test.

Having qualifying dependents can make you eligible for certain tax benefits, including Child Tax Credit, the Child and Dependent Care Tax Credit, and certain educational credits. How many dependents you have can also affect the Earned Income Tax Credit you are eligible for.