Chances are you know that “dependents” can be tax deductions for you. “Sweet,” you may be thinking. “My roommate cannot keep the bathroom clean or remember the cable bill due date… for sure they’re ‘dependent’ because they depend on me to do everything around here.”
Well… that logic may or may not hold up under IRS scrutiny. In this article we’ll help you understand the important criteria for adult dependent deductions, so you can claim them correctly. Many people today are lending a hand to roommates or housemates – relatives and non-relatives. It’s nice to know there’s an IRS deduction that helps you while you help others.
What are the qualifications for an “adult dependent?”
The IRS has strict criteria on who qualifies as a dependent. According to the IRS all dependents fall into two categories: a Qualifying Child or a Qualifying Relative.
In this article we’re discussing “qualifying relatives”. The first important point is, under the IRS definition your “qualifying relative” dependent does not need to be a familial relative. Whether it’s your buddy crashing on your couch or your daughter’s boyfriend living above the garage, if they meet IRS criteria they may be claimed as “qualifying relatives” on your return. The basic IRS qualifications for a legal adult dependent are:
They must be a U.S. citizen, U.S. national, U.S. resident alien, or resident of Canada or Mexico.
They must not be claimed as a dependent by anyone else on a tax return
They must not file a joint tax return as married unless the return is filed solely to claim a tax refund of income tax withheld or estimated tax payments made.
They must not claim anyone else as a dependent.
Unrelated adults must reside in your home to qualify as a dependent.
They must receive more than half their support from you.
Non-family dependents must live with you all year long in a relationship that doesn’t violate any local laws.
Familial dependents must be related to you in one of the ways the IRS lists.
Your dependent must be making less than $4,050 per year.
Can my adult relatives be claimed as dependents?
You can claim your relative as a dependent if they meet the criteria for dependents set out above. In fact, both blood relatives and in-laws may qualify as dependents even if they don’t live with you (as long as they meet all other criteria.). For example, if you provide more than half the financial support to your widowed mother-in-law, you can claim her as a dependent on your taxes, even if she is in an assisted living facility. And your mother-in-law does not lose potential dependent status if your spouse dies, or you and your spouse divorce.
Qualifying relatives include: siblings, half-siblings, and step-siblings. They also include parents, stepparents, grandparents, and great-grandparents. Nieces, nephews, aunts, and uncles can all be your dependents, as can in-laws.
What are The “Income” and “Support” Rules?
These are criteria the IRS uses to determine if your dependent claim is legitimate.
Under “The Income Rule” you must count all your potential dependent’s gross income (earned before taxes). This does include unemployment compensation, but does not include Social Security income that isn’t taxed. Your dependent’s total taxable income must be less than the personal exemption for the year in which you claim him or her.
“The Support Rule” requires that you provide at least 51 percent of your potential dependent’s financial support. Keep receipts for all expenses you cover including rent, groceries medical care, dental care, transportation and clothing. All of these qualify as “support” under the IRS rule. Recreation expenses such as concerts or going on a date do not qualify.
Does your potential dependent also receive financial support from others? Your contribution must still be 51 percent or more, unless the others sign a document called a “Multiple Support Agreement.” This lets you claim your dependent regardless of the others’ contributions. These agreements are most often used when siblings pool money to help elderly parents. The Multiple Support Agreement serves as legal consent by the others that they will not claim the individual receiving aid as their dependent. To claim your dependent under a Multiple Support Agreement you must still contribute at least 10 percent of total financial support.
Does the Tax Cut And Jobs Act (TCJA) affect Qualifying Relative dependent claims?
Changes in the 2018 tax code are huge, thanks to the Tax Cuts and Jobs Act. The elimination of personal exemptions is one of the biggest changes.
The $4050 exemption you claimed in 2017 for yourself, and possibly for your dependent, is gone. But there are still advantages to claiming dependents.
If you quality as “Head of Household”, for example, you are entitled to a larger standard deduction than if you file a single return. For 2018 that means an $18,000 standard deduction with dependent versus a $12,000 deduction without a dependent.
As Head of Household you can claim a dependent that lives with you at least half the year. You must be legally unmarried to file as Head of Household. This means that you are either single, or haven’t lived with your spouse during the last six months of the year. You must also document that you paid over half the expenses of maintaining your home during the tax year.
Most dependent options under the TCJA apply to those claiming children. But you can claim your adult dependent’s medical expenses as part of the medical expense deduction if you itemize your return.
Overall, the TCJA changes many things taxpayers have long been accustomed to.
