Tax rules for claiming dependents
By
Mary Beth Franklin, Senior Editor, Kiplinger's Personal Finance,
Source: Kiplinger Consumer News Service
The Great Recession took a toll on many American households as families turned to one another for financial support. If your household makeup changed in 2009, it is possible that you tax situation did, too.Say, your son can't find a job after graduating from college last spring and he moved back home. Or your daughter and grandchild moved in with you after your daughter's divorce.
Who qualifies as your dependent allowing you to deduct an additional $3,650 exemption on your 2009 tax return? (Each exemption reduces your taxable income by that amount). It depends on their age, income, how long they lived with you during the year (or in some cases, didn't live with you), and whether you provided more than half of their financial support. Dependents can be classified as a qualifying child or a qualifying relative.
To claim a qualifying child on your 2009 return:
- The person must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister or a descendant of any of them, such as grandchildren.
- The child must have been under age 19 at the end of 2009. (If the child is permanently disabled, age tests do not apply).
- If he or she was a full-time student, the child must have been under the age of 24 by the end of 2009. (Students who attended college at least five months in 2009 qualify).
- The child must have lived with you for more than half the year. (Temporary absences including being away at school don't count).
- The child must not have provided more than half of his or her own financial support.
To claim a qualifying relative:
- The person's income for 2009 must be less than $3,650 and you must have provided more than half of his or her support. If the person is unrelated, he or she must also have lived with you all year long as a member of your household.
- But if the person is related to you, he or she does not have to live with you in order to be claimed as your dependent. Qualifying relatives include children, stepchildren, grandchildren, siblings, parents, grandparents, in-laws, aunts, uncles, nephews and nieces.
So, back to the initial question about who qualifies as your dependent? Your boomerang daughter could be a qualifying relative if she earned less than $3,650 in 2009 and you provided more than half of her support. Even if your daughter made too much to qualify as your dependent, your grandchild might as long as your daughter agrees to let you claim the child as your dependent. If you're in a higher tax bracket than your daughter, claiming your grandchild as your dependent will save the family money.
If you recent college grad was under 24 at the end of last year and earned less than $3,650, he is a qualifying child and you can claim an exemption for him. But if he files his own tax return, he can't claim an exemption for himself.All contents copyright 2008 The Kiplinger Washington Editors, Inc.