Can I Claim My Cousin as a Dependent on My Taxes?

Determining who qualifies as a dependent on your tax return can significantly impact your financial situation. Claiming dependents may lead to valuable tax benefits, such as credits and deductions, potentially reducing your tax liability. However, the criteria for claiming someone as a dependent are specific and must be carefully considered.

Understanding these requirements is essential when assessing if you can claim your cousin as a dependent.

Family Relationship Rules

The IRS classifies cousins as “qualifying relatives,” which differs from “qualifying children.” Unlike qualifying children, qualifying relatives like cousins must live with you for the entire tax year, except for specific exceptions such as temporary absences due to education, illness, or military service.

The relationship must be established by blood or marriage, and your cousin cannot be a dependent of another taxpayer. Additionally, they must be a U.S. citizen, U.S. national, or a resident of the U.S., Canada, or Mexico.

Household Requirement

To claim your cousin as a dependent, they must share your principal place of abode for the entire tax year. Temporary absences, such as for school or medical care, are allowed, but the IRS requires consistent residency. Establishing this shared living arrangement is critical.

The IRS also considers the financial and emotional support provided within the household. If you significantly contribute to your cousin’s well-being and daily living expenses, this strengthens your claim. Documentation, such as lease agreements or utility bills, can help verify the shared living arrangement.

Financial Support Threshold

You must provide more than 50% of your cousin’s total financial support during the tax year. This includes expenses like housing, food, education, medical care, and clothing. Scholarships covering tuition do not count as your financial support, but other educational expenses you cover do. Document all financial contributions with receipts and bank statements.

For example, if you pay your cousin’s rent or buy their groceries, keep records to demonstrate that you provide the majority of their support.

Income Limits for Dependents

For a cousin classified as a “qualifying relative,” their gross income must be below the IRS-defined limit for the tax year, which is $4,400 in 2023. If your cousin earns more than this amount from wages, investments, or other sources, they cannot be claimed as your dependent.

Evaluate all income sources, including taxable interest and dividends. Certain types of income, like Social Security benefits, may not be counted if your cousin is not required to file a tax return.

Claiming Impact on Filing

Claiming your cousin as a dependent can affect your tax return, particularly in terms of tax credits, deductions, and filing status. While the dependent exemption is suspended until 2025, you could qualify for the Credit for Other Dependents, which provides up to $500 per dependent. This credit is nonrefundable.

Additionally, claiming a dependent may impact your filing status. If you are unmarried and supporting your cousin, you might qualify for the Head of Household filing status, which offers a more favorable tax bracket and a higher standard deduction. To claim this status, you must provide more than half the cost of maintaining the household. Proper documentation of these expenses is essential.

When filing with a dependent, include your cousin’s Social Security Number or Individual Taxpayer Identification Number on your return. Accuracy in this information is critical to avoid delays or penalties.

Recordkeeping Essentials

Maintaining thorough records is essential when claiming a cousin as a dependent. The IRS requires proof of eligibility, and inadequate documentation can result in the disallowance of your claim. Establish a system for tracking financial and household information throughout the year.

Keep detailed records of financial contributions, such as receipts for rent, utility bills, and grocery purchases. Bank statements and canceled checks can also serve as evidence. If your cousin has little to no income, a signed statement from them confirming their financial dependency on you may further support your case.

Proof of residency is equally important. Documents like lease agreements, school records, or mail addressed to your cousin at your home can help establish residency. If your cousin had temporary absences, retain records explaining these absences. Organized documentation will streamline the tax filing process and protect you in the event of an IRS audit.