People often ask me about whether they can claim dependents, whether they qualify for the head of household filing status, and whether they qualify for the earned income credit. These three tax benefits are very closely related, as are designed to help minimized the tax burden for working families. The rules in this area often cause confusion, because each tax benefit has its own, separate requirements.
The first thing to start with is dependents, for that is a common element is all three tax incentives. Both head of household and the earned income credit require that a taxpayer claim (or be eligible to claim) dependents. Dependents are, roughly speaking, persons who depend on another for their financial support, and the usual example here are children. But sons and daughters aren't the only types of relationships that can exist between a taxpayer and a dependent. Parents, grandparents, nieces and nephews, and other family relations can also qualify. The important thing to remember about dependents is there are two ways to qualify as a dependent: either under the qualifying child criteria or under the qualifying relative criteria. Claiming a dependent opens several tax saving benefits to a taxpayer: the taxpayer gets to claim one personal exemption for each dependent, and may also be eligible for the earned income credit, child tax credit, child care tax credit, education tax credits or deductions for that dependent, and medical expenses for that dependent. (By eligible to claim a dependent, I am referring to the situation where a custodial parent may waive the dependent's personal exemption in favor of the other parent, but retain eligibility for head of household and the earned income credit, a situation I call sharing the dependent-related tax breaks.)
Head of household is a separate tax benefit, one that functions by widening the income brackets to which each tax rate applies. For example, compare the income brackets for single and head of household filers found in the 2011 tax rates. To be eligible for head of household status, a taxpayer must have at least one dependent and be unmarried. So, this tax benefit is particularly well-suited for single parents. Now dependents can be of any number of family relations, but for Head of Household, the dependent must be closely related to the taxpayer by birth or marriage, such as children, parents, grandparents, nieces and nephews. There's a further restriction for Head of Household in that the dependent person must actually reside with the taxpayer, and the taxpayer must actually provide more than half of the total financial support of the dependent person. These two requirements are not always the case for dependents. For example, parents can be claimed as dependents under the qualifying relative criteria, and the parents don't necessarily need to reside with the taxpayer. But for head of household purposes, parents would need to reside with the taxpayer if the taxpayer wants to use them as their qualifying person.
The earned income credit is a refundable tax credit for lower-income families that in many cases results in the taxpayer having a negative effective tax rate, in other words that the taxpayer receives more back from the IRS than they paid in through income tax withholding. For the purpose of the earned income credit, only closely-related dependents will qualify. Specifically, children, grandchildren, brothers and sisters, nieces and nephews can qualify a taxpayer for the earned income credit. But parents, grandparents and other types of relationships won't qualify due to the age test, in which the dependent person must be under 19 or under 24 and a full-time student.
What often causes frustration are situations in which a taxpayer is caring for a younger person, but there's no relation by blood or marriage. In such cases, taxpayers might find they are eligible only for the single filing status and the dependent's personal exemption, but not head of household or the earned income credit.
Tax preparation software often includes questionnaires to help taxpayers determine whether they are eligible to claim a dependent, eligible for head of household, and eligible for the earned income credit. Many of these interview questions may seem repetitive, but that's because in each case the criteria are slightly different. The IRS has a Web tool for helping taxpayers figure out if they qualify for the earned income credit, called the EITC Assistant. But the IRS does not have (as far as I'm aware) similar Web tools for evaluating dependents and head of household situations.
Related: Can two people at the same address both be head of household?
Everything is very open with a really clear explanation of the issues.
It was really informative. Your website is very helpful.
Many thanks for sharing!
I haven’t been able to find anything that clearly addresses my situation. I am unmarried but my girlfriend and I have lived together for all of 2012. Our daughter was born October 2012. I have paid more than half the costs for the household. My question is: can I claim head of household & my girlfriend claim our daughter as a dependent?
I pay $12,000 a year in child support to my ex who has no income other than my child support ($1000/mo), disability for our son ($600/mo), SSI ($600/mo), and food stamps ($400/mo); her rent is $500 a month and utilities are roughly $150 a month, is she still able to claim Head of Household with my children that live with her as the qualifying dependants even though she has no income to have provided at least 1/2 of their household expenses? Does my child support or any of the other amounts she receives count as income for her in this instance? Thank you in advance for any assistance you can provide.
Chandler, Child support, SSI and Food Stamps are not taxable by the IRS. Your ex cannot report child support and you cannot deduct it from your income. If you paid alimony to your ex, they have to report it as income and you can deduct it from your income, but not child support. Your ex can claim HOH but they must have taxable income in order to get any benefits from it. If they have no TAXABLE income, you see I capitalized the word taxable, they can’t get any benefits claiming HOH; no EITC, no child tax credit, no additional child tax credit.
Chandler, your ex must have earned income to quality for EITC, she has no taxable or earned income that needs to be on a tax return.
Jon, if you can’t do that. The person with the lower income should file for the child as head of household and the other person as single. You both can’t be head of household. Unless, your girlfriend will file singe with a dependent and you file HOH using that child who does not qualify as your dependent. Please visit my website to learn more about us http://www.firm1040.com we file taxes all over the U.S.
So, i support my girlfriend and our daughter, they both live with me. Can i file for hoh?
Joei, review the criteria for being eligible for head of household. If you have a qualifying person for HOH, then it’s possible you can file as HOH.
I’m confused. I’m using h & r block online, I claimed head of household and my daughter. But it tells me I can’t claim my daughter as a dependent and use her for the head of household status. Is this an error? Am I missing something here?
I’m am permitted to claim my 16 year old on even numbered tax years. My child resides with me in excess of 70% of the time and I am the primary caregiver. Am I able to claim HOH for 2012 even though I’m not eligible to claim my child as a dependent for 2012?
I supported my my Son who is 27 years old for most of 2012, and he lived with us in our house. He has also filed his personal return for 2012 with a his Gross income of about $3500.00 for the whole year. Where on 1040 Form I can take a deduction of $3900.00 for paying most of his expenses for the year of 2012 claiming him as a dependent relative as he can’t be claimed as a dependent on mine and my wife’s joint return.
Surinder, the personal exemption is reported on Line 42 of the 2012 version of Form 1040.
Okay, my husband and I are both 18. We have a baby and live with my mom. I am a full time student and do not work so my mom is claiming me. But, my husband works full time and wants to claim his child obviously. But heres the thing… my mom receives food stamps for her, me, and my baby. We do not have my husband on there even though he lives with us because he makes so much money and we thought it might make the amount we get decrease. Can he still claim the baby without having any issues with food stamps that the baby receives?
I’m not an expert on public assistance programs. From a tax perspective, it sounds like your husband would be eligible to claim your baby as a qualifying child.
I have a daugther that is 16 . I divorce her father since she is 4 and never received any child support. I married on June 31st 2012. And since is my daugther all of her expenses are payed from me. Can I file married filing separate and have myself as headof household ?
Anita, refer to the article on head of household for a discussion of the criteria for filing as head of household under the considered unmarried provisions.
My ex and I were never married. He lives out of state and pays child support. Our legal agreement states we will alternate years for claiming our son as a dependent on taxes.
In 2010, I claimed HOH but did not get the Child tax credit.
For 2012, my son lives with me FT all year, and I paid more than half of his expenses. He is 9.
This year my tax software is giving me a hard time. It is not allowing me to indicate HOH status without claiming him as a dependent. I do not want to claim him, because we will get in trouble if we both do. What should I do?
Lastly, can I qualify for EITC?