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Raising children is expensive — but having kids can sometimes get you some generous breaks on your federal income tax return.
In order for your child to help you score tax savings, they need to meet certain IRS criteria. In particular, your child must be considered a “qualifying child” in order for you to be eligible for many tax breaks.
There are specific requirements for who’s considered a qualifying child. But there are also some exceptions to those requirements, like when parents are divorced or an adult child is permanently and totally disabled.
Let’s look at the tests the IRS applies to determine if a dependent is a qualifying child, and the types of tax breaks you might be entitled to if you have a qualifying child.
Who is considered a qualifying child?
The terms “dependent” and “qualifying child” sound like they might be interchangeable for tax purposes. While they’re related, they don’t mean exactly the same thing. A dependent may be either a qualifying child or a qualifying relative — who’s not necessarily a child.
A qualifying child is a child whose relationship to you meets five qualifying tests for relationship, age, residency, support and joint return. Having a qualifying child may entitle you to certain tax benefits like the earned income credit, child tax credit, child and dependent care credit, or head of household filing status.How to file as head of household
Qualifying child tests
The IRS uses five tests to determine if someone is a taxpayer’s qualifying child.
The relationship test
To meet this test, your child must be related to you — a son, daughter, legally adopted child, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of those relatives (for example, a grandchild).
The age test
To meet this test, your child must be …
- Younger than 19 at the end of the year and younger than you (or your spouse if you file jointly), or
- Younger than 24 at the end of the year, a full-time student for some part of each of any five months of the calendar year and younger than you (or your spouse if you file jointly), or
- Any age if permanently and totally disabled at any time during the year
The residency test
Your child must live with you for more than half the year to meet this test. There are exceptions to this rule, including …
- Temporary absences for circumstances like illness, education, business, vacation, military service or detention in a juvenile facility
- The birth or death of a child during the year
- Kidnapped children
- Children of divorced or separated parents
The support test
Your child can’t have provided more than half of their own support for the year. For this test, foster care payments and scholarships aren’t considered support provided by the child.
The joint return test
To be considered a qualifying child, your child can’t file a joint return. There is an exception: They may still be a qualifying child if the only reason they filed a joint return was to claim a refund of income tax they had withheld from wages or estimated tax they paid. In that case, your child must also meet all the other tests to be considered a qualifying child.
It’s also important to note that somebody generally can’t be considered a dependent unless they’re a U.S. citizen, U.S. resident alien, U.S. national or a resident of Canada or Mexico, although there are some exceptions. And they’ll often need to have a valid Social Security number.
Only one person can claim a qualifying child
Sometimes, your child might pass all the qualifying child tests for more than one taxpayer. For example, this could happen if a child’s parents are divorced, or if a child lives part of the year with grandparents. In circumstances like these, only one person can claim the child as a qualifying child and claim any tax benefits.
The IRS applies tiebreaker rules if multiple people can claim a child as a qualifying child. Generally, the winner of the tiebreaker will be …
- The child’s parent or parents (if filing a joint return) if the other taxpayer is not a parent of the child
- The parent with whom the child lived for the longer amount of time during a year if the parents don’t file a joint return
- The parent with the higher adjusted gross income for the year if the parents don’t file a joint return and the child lived with each parent for the same amount of time during the year
- The person with the higher AGI for the year if neither of the taxpayers are the child’s parents
- The person with a higher AGI for the year if higher than a parent who could claim the child as a qualifying child but who doesn’t choose to do so
What is AGI?
Gross income is all the income you receive in a year, whether it’s wages from a job, self-employment income, interest on a financial account, dividends on investments or other sources of personal revenue. Adjusted gross income is your gross income minus adjustments.
Calculating your AGI is the first step toward figuring how much tax you’ll pay in a given year. Learn more about AGI.
Exceptions to the rules
While children typically have to fulfill all five tests to be a qualifying child, there are some exceptions — particularly when it comes to the residency rule.
For example, a child who fails the residency test because of a kidnapping may still be a qualifying child if …
- Law enforcement presumes the child has been kidnapped by someone who’s not a family member of you or the child
- The child lived with you for more than half of the portion of the year before being kidnapped
- In the year the child is returned to you, the child lives with you for more than half of the portion of the year following their return
- You would have qualified for head of household status if the child hadn’t been kidnapped.
Tax breaks for having a qualifying child
Having a qualifying child can affect your taxes in many different ways.
- A qualifying child may allow you to claim the child tax credit
- A qualifying child could allow you to qualify for head-of-household filing status
- A qualifying child is one requirement to qualify for a credit for child and dependent care expenses
- Qualifying children can count as dependents
- Your number of qualifying children can affect how much, if any, earned income tax credit, or EITC, you qualify for
Previously, you could claim a personal exemption for each dependent, but the Tax Cuts and Jobs Act has suspended the deduction for personal exemptions. It still matters if you have a dependent, though, because dependents can sometimes make you eligible for additional tax savings. For example, if you pay college tuition for a qualifying child who counts as a dependent, and you meet other requirements, you may become eligible for the American opportunity tax credit.
Raising children is expensive, but parenthood has its rewards, too. You may even be able to reap some tax breaks if your child meets the criteria for being considered a qualifying child. The rules are detailed and specific, so be sure you understand if your child passes all the required qualifying tests. You can learn more about dependents and children in IRS publications 929 and 501.
A senior product specialist with Credit Karma Tax®, Janet Murphy is a CPA candidate with more than a decade in the tax industry. She’s worked as a tax analyst, tax product development manager and tax accountant. She has accounting degrees and certifications from Clemson University and the U.S. Career Institute. You can find her on LinkedIn.