Many taxpayers mistakenly pass up valuable tax exemptions, not realizing that they qualify for them. For example, you may be entitled to additional dependency exemptions if you support your elderly parents, other relatives, or even people not related to you who live in your household. If you provide more than half the support for anyone and you haven’t claimed the person as a dependent in the past, make sure you read and understand these rules.
Each dependency exemption you claim is worth a $4,050 deduction (2017 and 2016). However, the 2017 exemption is subject to a phase-out that begins with adjusted gross incomes of $261,500 ($313,800 for married couples filing jointly). It phases out completely at $384,000 ($436,300 for married couples filing jointly).
You may claim one dependent exemption for each child who is what the IRS calls a “qualifying child.” A qualifying child is:
Most qualifying children are the biological, adopted, or stepchildren of the taxpayers who claim them as dependents, but this doesn’t have to be the case. For example, a brother, sister, or grandchild can be your qualifying child if he or she is under 19, lives with you over half the year, provides less than half of his or her own support, and is a U.S. citizen or resident. Moreover, a qualifying child can be as old as 23 if he or she is enrolled in school full-time.
To obtain an exemption for a dependent child, you must list the child’s Social Security number on your tax return. No number, no exemption. This rule is intended to prevent people from claiming exemptions for children who don’t really exist. You may obtain a Social Security number for your child by filling out and filing Social Security Form SS-5. See the Social Security Administration website at www.ssa.gov for details. It takes about two weeks to get a Social Security number. If you do not have a required SSN by the filing due date, you can file IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. If you or your spouse is expecting a child, apply for a Social Security number at the hospital when you apply for your baby’s birth certificate. The state agency that issues birth certificates will share your child’s information with the Social Security Administration and it will mail the Social Security card to you.
Most dependents are taxpayers' children. But they don't always have to be. If you contribute toward the support of a parent or other relative (or even a nonrelative in some cases), you could be entitled to claim a dependent exemption for that person. Even if you haven’t taken a dependency exemption for the person in the past, in some cases paying just a few dollars more to support the person during the year could entitle you to a valuable exemption.
To be your qualifying relative, a person must pass three tests:
Member of household or relationship test
First of all, the person must either be related to you or live with you as a member of your household. “Related” means the person is either:
If any of these relationships were established by marriage, they don’t count if the marriage was later ended by death or divorce.
The person’s taxable income must be very low—no more than the dependent exemption.
You must pay for over half the person’s support during the year (unless there is a multiple support agreement).