The person for whom a taxpayer claims a dependency exemption for is called a dependent. A dependent must be someone other than the taxpayer or their spouse. There are two different distinctions of dependents: qualifying child and qualifying relative. A dependent must be one of the two classifications, as well as meeting a few other requirements in order to qualify for an exemption. By claiming a dependency exemption, taxpayers can reduce the amount of income that is subject to taxation. In 2014, the dependency exemption is equal to $3,950. These exemptions can’t be claimed if the dependent is eligible to be claimed by someone else on their return.

Qualifying Relative

The requirements for a person to be considered a qualifying relative dependent are based on five different dependency tests. The person you want to claim as a dependent must meet all five conditions of relationship, gross income, support, citizenship/residency, and joint tax return.

• Relationship: These dependents are required to be related in one of the following ways but don’t have to live with you: children, grandchildren or great-grandchildren who don’t meet the requirements for a qualifying child exemption, such as fulfilling the age/student test or household occupancy test; brother/sister and step-siblings; niece/nephew; in-laws; parents and step-parents; grandparents and great-grandparents; aunts and uncles related through blood only. In cases where the child doesn’t meet the rules of a qualifying child, you may be able to claim a qualifying relative dependent provided you have been responsible for over half of their support and they have an income less than the exemption amount. If a non-listed relative lives with you, and has created a domicile in your household for the entire tax year, (temporary absences aside), they may be able to meet the relationship test. The relationship cannot be illegal in the state or locality where you reside. For example, you can’t claim a dependency exemption for a married person who lives with you as opposed to their spouse, if that habitation violates the state laws.
• Gross Income: Once you’ve determined if a person meets the relationship test, the next step is to calculate their gross income. A dependent can’t have a gross income greater than $3,950 to be claimed as a qualifying relative, regardless of the amount of support you have provided.
• Support: You have to provide the qualifying relative with over half of their total yearly support.
• Citizenship/Residency: The relative must be a U.S. citizen or national, although a resident of the U.S., Canada, or Mexico is also eligible.
• Joint Return Test: In order to claim the qualifying relative dependency exemption, the dependent can’t file a joint return with their spouse (if married). If a joint return is filed, neither spouse can have a tax liability, and may be seeking a refund of excess tax only. The couple can’t claim a personal exemption on their joint return.