Can My Parents Claim My Child as a Dependent?

It is a common question in multi-generational households: when a child lives with both a parent and a grandparent, who is entitled to claim the child as a dependent on their tax return? The living arrangement, while common, creates uncertainty about how to properly follow Internal Revenue Service (IRS) regulations. Navigating these rules is necessary for ensuring tax compliance and correctly applying for the tax benefits associated with having a dependent.

The Qualifying Child Tests

To claim a child as a dependent, the child must meet five specific criteria to be considered a “qualifying child” under tax law. These tests are the foundation for determining eligibility, and all five must be satisfied. Failing even one test means the child is not a qualifying child for that individual.

Relationship Test

The first test examines the relationship between the adult and the child. The child must be the taxpayer’s son, daughter, stepchild, eligible foster child, brother, sister, or stepsister. The rule also includes any descendant of these individuals, which covers a taxpayer’s grandchild.

Age Test

The child must be younger than the person claiming them and under the age of 19 at the end of the tax year. An exception exists for full-time students; if the child was a full-time student for at least five months of the year, the age limit increases to under 24. There is no age limit for a child who is permanently and totally disabled.

Residency Test

For the residency test, the child must have lived with the taxpayer for more than half of the year. The IRS considers temporary absences for school, vacation, medical care, or military service as time lived at home. For example, a grandchild away at college is still considered to have lived with the grandparent if the grandparent’s home is their permanent residence.

Support Test

The support test requires that the child did not provide more than half of their own financial support during the tax year. This focuses on the child’s contribution, not the taxpayer’s. For instance, if a child earns income from a part-time job but those earnings do not cover more than 50% of their total living expenses, they can still meet this test.

Joint Return Test

Finally, the joint return test stipulates that the child cannot file a joint tax return with a spouse for the year. An exception applies if the child and their spouse file a joint return solely to claim a refund of income tax withheld and had no separate requirement to file a return.

Applying the Tie-Breaker Rules

When a child meets the qualifying child tests for more than one person in the same household, such as for a parent and a grandparent, the IRS has “tie-breaker” rules to determine who has the primary right to claim the dependent. It is not a matter of choice or agreement; the regulations dictate the outcome based on the relationship of the claimants to the child.

The primary tie-breaker rule is that if one of the individuals who can claim the child is the child’s parent, the parent automatically wins the right to claim the dependent. This means a grandparent cannot claim their grandchild as a qualifying child if the child’s parent is also eligible. This is true even if the grandparent provides the majority of the financial support or has a higher income.

For example, if a mother and her child live with the grandmother for the entire year, and the child meets the qualifying tests for both, the mother has the right to claim the dependent. The grandmother is not eligible to claim the child, even though she also meets the five tests.

A different rule applies if neither eligible individual is the child’s parent. For instance, if a child lives with a grandparent and an aunt and both meet the qualifying child tests, the tie is broken by income. The person with the higher adjusted gross income (AGI) for the tax year gets to claim the child.

Scenarios Where a Grandparent Can Claim the Child

While the primary right to claim a child belongs to the parent, specific circumstances exist where a grandparent is permitted to claim their grandchild as a dependent. These situations arise when the parent is either ineligible to claim the child or chooses not to do so.

A grandparent can claim a grandchild if the child is a qualifying child of the grandparent but not of the parent. This commonly occurs if the child fails the residency test for the parent but passes it for the grandparent by living with them for more than half the year. If all other tests are met for the grandparent, they can claim the dependent.

Another scenario involves an eligible parent choosing not to claim their child. In this situation, another person may be able to claim the child under strict conditions. The grandparent can claim the child if their adjusted gross income (AGI) is higher than the AGI of any parent who is eligible to claim the child. This rule prevents a lower-income parent from forgoing the claim simply to shift the tax benefit to a higher-income grandparent.

A grandparent may be able to claim a grandchild as a “qualifying relative” if the child does not meet the qualifying child tests. This requires a different set of tests, primarily that the grandparent provides more than half of the child’s total support for the year. Additionally, the child’s gross income must be below a specific annual threshold ($5,050 for tax year 2024).

Tax Implications of Claiming a Dependent

Determining who can claim a child as a dependent is a significant financial matter because it unlocks several valuable tax benefits. These benefits can substantially reduce a taxpayer’s liability and potentially increase their tax refund. Claiming a dependent provides access to other financial advantages, including:

• The Child Tax Credit, available for each qualifying child under the age of 17.
• The Credit for Other Dependents, for those who do not meet the age requirement for the Child Tax Credit.
• The Head of Household filing status, which offers a larger standard deduction and more favorable tax brackets.
• The Earned Income Tax Credit (EITC), a refundable credit for low- to moderate-income working individuals with qualifying children.
• The Credit for Child and Dependent Care Expenses, which helps offset the cost of care for a child under 13.
• Certain education-related tax benefits, such as the American Opportunity Tax Credit.