Claiming Dependents on Your Federal Tax Return

How to Save Money With Dependent Tax Credits

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Claiming dependents can save you a good bit of money at tax time. It can qualify you for the head-of-household filing status as well as various tax deductions and even a few tax credits. Some credits also increase with the number of dependents you claim, such as the itemized medical expense deduction and the tuition-and-fees deduction.

The exact rules for dependents vary depending on which credits or deductions you are claiming. But overall, they mirror the rules for being able to claim dependents in general.

Key Takeaways

  • Claiming dependents can change your tax filing status and qualify you for credits that reduce the tax you owe.
  • Some credits are refundable, meaning you will receive them as a refund even if you don't owe any tax.
  • A dependent can only be claimed on one tax return, and you may need documents that will support your claim.
  • Each dependent tax credit has different rules and income limits to qualify.

Tax Credits and Deductions for Dependents

Several tax credits are based on the number of dependents you have, including:

  • Child Tax Credit
  • Additional Child Credit
  • Credit for Other Dependents
  • Child and Dependent Care Tax Credit
  • Earned Income Tax Credit
  • Adoption Credit

The Child Tax Credit

The Child Tax Credit was expanded under the American Rescue Plan Act (ARPA), signed into law on March 11, 2021. It is worth $3,600 per child dependent under the age of six and $3,000 for children between ages six and 17.

Individual taxpayers with modified adjusted gross incomes (MAGIs) up to $75,000 ($112,500 for heads of household) and married taxpayers filing jointly with MAGI up to $150,000 are eligible for the full credit. These changes apply to 2021 only.

For families who claimed the Child Tax Credit in 2019 or 2020, half the amount of the Child Tax Credit was paid as advance payments in 2021. You will be able to claim the other half when you file your 2021 tax return in 2022.

The Child Tax Credit is fully refundable, which means you get back the full amount of the credit even if it is greater than the amount of tax you owe.

Note

Before 2021, the refundable portion of the Child Tax Credit was known as the Additional Child Tax Credit (ACTC). It was worth up to $1,400 per child. For the 2021 tax year, this $1,400 ACTC limit continues to apply to Americans who live outside the U.S.

Credit for Other Dependents

The $500 Credit for Other Dependents (ODC) was introduced in 2018. It's something of an offshoot of the Child Tax Credit. This credit covers children and adults who don't meet the qualifying child rules. This might be due to their age (over age 16) or because they don't have a Social Security number. To qualify for the ODC, your dependent:

  • Must be claimed as a dependent on your tax return.
  • Cannot be used to claim the Child Tax Credit or the Additional Child Tax Credit.
  • Must be a U.S. citizen, national, or resident alien.

The Child and Dependent Care Credit

The Child and Dependent Care Credit was expanded for 2021 only under ARPA. For the 2021 tax year, it is worth up to 50% of the first $8,000 you spend for care for one dependent, or $16,000 for two or more dependents.

The actual credit amount that you can receive is calculated based on your income and how much you spend on child care. The credit is for childcare expenses that allow you to work, look for work, or go to school. Depending on your personal tax situation, it might be refundable, which means you might be able to claim the credit even if you don't owe taxes.

The Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is for low- or mid-income taxpayers. The amount of the credit is based on your dependents, your income, whether you are disabled, and other criteria. There are also special rules for members of the military or clergy.

For the tax year 2021 (the return you file in 2022), the EITC is worth up to $6,728 if you have three or more qualifying dependents, but income limits apply. To qualify for this credit, you must have earned income, such as income from wages, tips, commissions, salary, certain disability benefits, or self-employment.

Earned Income Tax Credit Income and Credit Amounts
Number of Dependents Maximum Income (Married Filing Jointly) Maximum Income (Other Filing Status) Max Credit Amount
 0  $27,380  $21,430  $1,502
 1  $48,108  $42,158 $3,618 
 2  $53,865  $47,915 $5,980 
 3 or more  $57,414  $51,464 $6,728 

Adoption Credit

If you adopted a child in 2021, you may be eligible for the Adoption Credit. You might also be able to exclude any adoption benefits that your employer provides from your 2021 taxable income.

You must be a U.S. citizen or resident alien for the entire 2021 tax year to claim this credit. If you are married, your spouse must also have been a U.S. citizen or resident alien for the entire year. Other things that impact your eligibility include:

  • The year your adoption expenses were paid.
  • The year the adoption became final (if it is final).
  • The age of the child.
  • Whether the adoption was foreign or domestic.
  • Whether the child has special needs.
  • Whether you received any adoption assistance, and in what year you received it.

If you adopted multiple children, you may be eligible to receive an additional credit for each child.

Note

You can also claim the American Opportunity Tax Credit and the Lifetime Learning Credit for education-related expenses for yourself and your dependents.

2021 Status of Personal Exemptions

The Internal Revenue Code used to allow taxpayers to deduct personal exemptions for themselves, as well as for each of their dependents. These deductions reduced your gross income to arrive at your taxable income for the year. The provision was eliminated, though, in 2018 by the Tax Cuts and Jobs Act (TCJA).

The TCJA is set to expire at the end of 2025. One of three things could happen at that time:

  • Congress does not renew the law, and personal exemptions return.
  • Congress renews this provision of the TCJA, and the personal exemption doesn't come back.
  • Congress makes changes to the TCJA that might or might not affect personal exemptions.

Who Qualifies for Dependent Credits?

A dependent can be claimed by only one taxpayer in any given year. You and your spouse, ex-spouse, or co-parent can't both claim your child as a dependent on separate returns. Your child must be claimed by one of you or the other. The same goes for non-child dependents. For example, you and your siblings can't all claim your parent as a dependent.

You can't claim anyone as your dependent if you're someone else's dependent. Likewise, no one else can claim you as a dependent if you claim a dependent. For example, if you live with your parents and have a child, you can't claim your child as a dependent if your parents claim you.

You can't claim a dependent who is married and files a joint return with their spouse, with one exception. A married person can file a joint return and still be claimed as a dependent by another taxpayer if the joint return was filed only so that the couple could claim a refund. Neither spouse would have had any tax liability if they had filed separate returns.

Note

Your dependent must be a U.S. citizen, a national, a resident alien of the U.S., or a resident of Canada or Mexico.

Qualifying Child Dependents and Qualifying Relatives

All dependents fall into one of two categories. They must be either a qualifying child or a qualifying relative. Different rules apply to each.

Qualifying Children

A qualifying child must be related to you, but you don't have to be their biological parent. You can be their sibling, aunt, uncle, foster parent, adoptive parent, grandparent, step-parent, or half-sibling. There must be a legal or familial relationship.

A child can only qualify as your dependent until their 19th birthday unless they're a full-time student. If your dependent is a full-time student, you can continue to claim them until they reach age 24. The child can't contribute more than half of their own support for the year if they work.

Note

There's no age limit for children who are disabled.

A qualifying child must live with you for more than half the year. Time spent away at college doesn't count as living away because they're expected to return to your home as their primary residence at some point. More than half a year means six months and one day at a minimum. If you share custody with another guardian, you may need to keep a log of where the child spends each night.

Qualifying Relatives

You can also claim a qualifying relative as a dependent if they're too old to qualify as your dependent child. Some relatives must live with you in your home for the full year. Close relatives like your parent, grandparent, sibling, niece, or nephew do not necessarily have to live with you for the full year.

Your relative's income can't exceed the amount of the personal exemption for the tax year. The tax code still includes a provision for what the exemption would have been worth for purposes of defining dependents for other tax breaks, even though personal exemptions were eliminated by the TCJA in 2018. The income limit is $4,300 for the 2021 tax year.

You must provide more than half of that person's support needs according to the same rules for what constitutes support for a child dependent.

Your relationship can't violate local law if your dependent must live with you all year because they're not closely related to you. For example, you can't claim a married individual as your dependent if your state prohibits cohabitation with a married person, even if you meet all of the other criteria.

Note

Domestic partners can be claimed as qualifying relatives, although it is unlikely that a domestic partner will meet gross income requirements to qualify as a dependent.

You Can Waive Your Right to a Dependent

The rule that no two taxpayers can claim the same dependent is carved in stone. The IRS, though, does provide a couple of options that allow you to transfer your right to claim your dependent to someone else.

The Multiple Support Declaration

You can file Form 2120, the Multiple Support Declaration, with the IRS if multiple people support a single person. For example, you and your siblings might collectively support your parent. That will allow just one of you to claim the supported person as a dependent. You will all have to agree in writing as to which one of you will claim the dependent.

That person must have paid for more than 10% of the dependent's total support for the year. Total support payments include lodging, groceries, clothing, education, transportation, medical and dental care, and recreation.

Release of Claim to Exemption

A non-qualifying parent can still claim their child as their dependent if the qualifying parent releases their claim. You would do this by filing Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, with the IRS. You can indicate the year or years for which you're agreeing to release your claim. You can also revoke the release if you later change your mind.

This rule doesn't apply to all tax credits and deductions, though. The right to claim the child can't be transferred in some cases, such as to claim head-of-household filing status. The child must actually live with you in order for you to qualify for that status.

What Happens When Two or More Taxpayers Claim the Same Dependent?

To claim a dependent, you must enter their Social Security number. This makes it easy for the IRS to flag two returns that claim the same dependent or dependents.

If that happens, the IRS will step in to straighten things out. Both returns will be audited to determine which of you has the best right to claim the dependent as your own. The losing taxpayer will probably have to pay additional taxes, plus penalties and interest.

Note

The IRS can't legally tell you the name of someone else who claimed your dependent. But if you don't know who else might have done it, your child or relative might have been the victim of identity theft.

The IRS uses tie-breaker tests to determine which taxpayer is eligible. In order of priority, the taxpayer who is most eligible to claim a child as a dependent under the qualifying child criteria is:

  • A parent rather than another relative.
  • The parent with whom the child lived longer during the year. Chances are, the child will spend at least one day more with one parent than the other because there are usually 365 days in a year, unless the child spent some time in another home.
  • The parent with the higher adjusted gross income if the child spent exactly an equal amount of time with each parent or if it can't be determined whom they actually spent more time with.
  • The taxpayer with the higher adjusted gross income gets to claim the child If neither taxpayer is the child's parent.

Frequently Asked Questions (FAQs)

What is the penalty for claiming false dependents?

Falsely claiming a dependent is a way to illegally reduce your tax liability and, if done so willfully, a type of tax fraud. Anyone who is found guilty of tax fraud can be fined up to $100,000, imprisoned for up to three years, or both.

How do I report someone falsely claiming dependents?

If you think someone has falsely claimed dependents you're entitled to claim, you'll need to file your return, claim the dependent, and offer proof that you are legally entitled to claim them. The IRS provides a list of acceptable documentation on Form 886-H-DEP. You and the other taxpayer will receive a letter about the double claim. If neither of you then files an amended return without the dependent included, you'll both be audited to verify who may claim them.

How does claiming dependents affect my paycheck?

Claiming dependents reduces your taxable income. If you account for these dependents when you fill out form W-4, that will reduce your tax withholdings and increase your net paycheck.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
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