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Rules for declaring dependents at tax time

Tax rules for claiming dependents

Most people know about the Child Tax Credit. But if you're part of a big family, or part of a non-family household, there are other tax breaks available to you — if you can claim some of your household as dependents.

Why claim dependents?

Prior to the 2017 Tax Cut and Jobs Act, each dependent reduced your taxable income via personal exemptions, worth about $4,000 per person. The TCJA eliminated exemptions in favor of a higher standard deduction.

However, listing dependents on your return is still required if you plan to claim the Child Tax Credit or the child and dependent care credit for any of those dependents. If you're unmarried, having dependents qualifies you to file as Head of Household, which gets you a higher standard deduction and more favorable tax brackets.

"If you want to take that head of household status where you can get an additional standard deduction, that's when you would need to claim a dependent," said Alicia Jegede, founder of New Gen Financial.

Who can be a dependent?

A dependent can be your child or a qualifying relative. To claim a child as a dependent, the child needs to be a U.S. citizen or legal resident, have lived with you for more than half the year and not have provided more than half of their own living costs.  They also need to be 18 or younger, although if they're a full-time student, the age cutoff is 24.

Tax tips for parents or guardians of children

You can also claim a relative as a dependent, as long as they meet most of the other dependency requirements, such as being a U.S. citizen or resident, not supporting themselves and not earning more than $4,200 over the year. That means parents supporting adult children who have aged out of the Child Tax Credit can still claim up to $500 as a dependent care credit. 

Children who are supporting their elderly parents can claim them as dependents, also. You can even claim a non-relative who lives with you and meets the other requirements.

"If you have a friend that's living with you, and they lived with you for the full year, they didn't have a job, you provided most of their support, they made under $4,200 — you can claim that person as a dependent," Jegede said.

There's one other thing to keep in mind: One person can only be claimed as a dependent once. If you're divorced or raising children with an unmarried partner, make sure to coordinate so that you don't claim the same dependents. Otherwise the IRS will flag you for extra scrutiny. No one wants that.

If you're claiming a dependent, check to see if you can also deduct some of the costs of their care. You can write off up to $3,000 for one person, or $6,000 for two or more, if you paid for their care during the year.

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