With all these tax benefits tied to claiming a dependent, it is important to know whether or not your dependent can be claimed on your tax return.
To be eligible to claim a dependent, a taxpayer would need to meet the following four general criteria:
- The taxpayer is not a dependent of another person. Persons who are dependents are treated as not being eligible to claim dependents.
- The taxpayer cannot claim a dependent who is married and files a joint return. However, there's an exception. A married person can file a joint return and still be claimed as a dependent if that joint return claims only a refund of tax withholding or estimated tax payments and there would be no tax liability for either spouse had they filed separate returns.
- The dependent in question is a citizen, national or resident alien of the United States, or a resident of Canada or Mexico.
- The dependent in question meets the definition of being either a qualifying child or a qualifying relative.
Every dependent who qualifies under either set of criteria can be claimed by one and only one taxpayer for that year. There are additional rules that help the IRS make sure that not more than one taxpayer claims the same dependent.
First, the qualifying child criteria always take precedence over the qualifying relative criteria. So if someone can claim a dependent as a qualifying child, then no one else can claim the same dependent as a qualifying relative.
Secondly, within the qualifying child criteria, the child must have been residing with the taxpayer for more than half the year. Within the qualifying relative criteria, the taxpayer must provide more than half the cost of the relative's support and care.
The IRS will always audit tax returns where two or more taxpayers attempt to claim the same dependent, and only one taxpayer will win. The taxpayer who loses might also lose the related tax breaks such as the child tax credit, the earned income credit, or the Head of Household filing status. What that means, is that the losing taxpayer will have to pay additional taxes, plus penalties and interest. That makes dependent audits one of the most expensive audits that a taxpayer can endure.
To protect yourself, you should make sure that you are eligible to claim each dependent shown on your return. Parents who do not live with each other, whether or not married, should also review the rules for sharing the tax benefits of a dependent. If you claim a dependent, you should gather any documents that would support your claim, and keep these documents for future reference. It would also be advisable to get a written agreement with the other parent detailing who gets to claim the dependents and for which years.