As a taxpayer you are able to claim exemptions for dependents, these dependents will fall under one of two categories; qualifying child or qualifying relative. By claiming dependents on your taxes you will lower your taxable income by an amount for each dependent that is equal to the exemption. For 2014 the dependency exemption was $3,950 so you would deduct that amount from your earned income for each eligible dependent. You are only able to claim dependents on one tax return, if someone else has already claimed a person as a dependent you cannot claim them as well.
In order for a child to be claimed as a dependent they need to meet the requirements set forth by the IRS to determine dependency. In order for a child to qualify they need to meet five dependency tests: they must be a member of the household or relationship, they must be a citizen or resident, joint return, and they must fall under the age guidelines or a be a student and they must have been supported.
- Household Member: Dependents are required to live with you over half the tax year. Absences that are temporary, including thing such as school attendance, vacation and stays in the hospital are excused. There is no requirement for owning your own home or paying any maintenance expenses. They child must live with you for over half of the year to be considering a qualify dependent.
- Relationship Status: The dependent must be related to you in some form. They will be consider related as a; child, sibling, stepbrother/stepsister, half-siblings, grandchild, niece/nephew or a child that has been adopted legally, placed for adoption or a foster child.
- Resident or Citizen: The dependent must be a citizen of the United State or a resident of the United States, Canada or Mexico.
- Joint Return: Dependents may be married, but they may not file a joint return with their spouse if they are being claimed as a dependent. If they do decide to file a return they can only file to claim a refund and are unable to claim themselves or a spouse as dependents on a joint return.
- Age or Student: Dependents must be under the age of 19 by the end of the tax year, unless they are a student full time. For full time students the age of dependency increases to 23, as long as they are a student for at least 5 months. If a child is permanently disable they are exempt from this test.
- Support: Dependents will have had to been supported for over half of their expenses for the year. Support includes things such as, clothing, shelter, education expenses, medical and dental care, transportation and recreation. Support such as food stamps, welfare and housing that is funded by the state government is included.