"Boomerang" children are grown children who moved away from home but later move back in with their parents because they can't afford to support themselves. Because of the recession and high unemployment among young people, boomerang children are a rapidly growing phenomenon.
You may or may not be happy to have your child move back in with you, but at least a boomerang kid can help reduce your tax burden.
If a boomerang child qualifies as your dependent for tax purposes, you'll be able to claim a dependent exemption for him or her. For 2014, the dependent exemption is $3,950. This means that your total tax bill is reduced by $3,950 for each dependent exemption.
There are two ways a boomerang child can qualify as your dependent--as a qualifying child or a qualifying relative:
Boomerang Child a "Qualifying Child"
Your child will be a "qualifying child" for dependent exemption purposes if he or she:
- is under age 19 at the end of the tax year, or under age 24 if a full-time student for at least five months of the year, or any age if permanently and totally disabled at any time during the year
- is not self-supporting—did not pay for over half of his or her own support during the year, and
- lives with you—either for more than half of the year or falls within special rules for children of parents who are divorced, separated, or living apart (temporary absences for things like schooling, medical treatment, vacations, business, or military service don’t count).
Note that it doesn't matter how much income a qualifying child has as long as the income doesn't provide over half of the child's own support.
Boomerang Child a "Qualifying Relative"
A boomerang child who does not meet the test to be your qualifying child--for example, because he or she is too old--can still be your qualifying relative, which lets you claim a dependent exemption for the child. This is the only way a child 24 or older can qualify as your dependent, unless he or she is totally disabled. A child of any age can be a qualifying relative if the following support and gross income tests are met.
To be your qualifying relative, your child must pass two tests:
- Gross income test: The child's taxable income must be very low—no more than the dependent exemption, which is $3,800 in 2012. Tax-free student scholarships are not included in income.
- Support test: You must pay for over half of your child's support during the year (unless there is a multiple support agreement). This differs from the qualifying child test, which requires only that the child not provide more than half of his or her own support, but doesn’t require that the person claiming the exemption pay for more than half of such support.
Other Tax Benefits
You may be entitled to other tax benefits for expenses you pay for a boomerang child, depending on your situation. These may include:
- education deductions or credits if you help pay the tuition costs of a child who attends a postsecondary educational institution, and
- medical expense deductions if you paid all or part of the child's medical and dental expenses (but this is an itemized personal deduction deductible only to the extent the total amount for the family exceeds 10% of your adjusted gross income).
If you hire your child to work as a legitimate employee in your business, you'll be able to deduct the salary and any other benefits you provide to him or her, including health insurance.