Can Two Parents Claim a Child as a Dependent?
Understand the complex rules for claiming a child as a tax dependent. Get clarity on eligibility, benefits, and IRS resolutions for shared claims.
Understanding who can claim a child as a dependent for tax purposes is a common inquiry. While the concept might seem simple, specific situations, especially involving unmarried or separated parents, can introduce complexities. Claiming a dependent can significantly impact a taxpayer’s financial situation through various tax benefits.
General Eligibility for Dependent Children
To claim a child as a dependent, the child must meet several Internal Revenue Service (IRS) tests to be considered a “qualifying child.” A child must satisfy all five of these criteria.
The Relationship Test
The Relationship Test specifies that the child must be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them, such as a grandchild. An adopted child is also considered your child.
The Age Test
The Age Test requires the child to be under 19 at the end of the tax year, or under 24 if they were a full-time student for at least five months of the year. There is no age limit if the child is permanently and totally disabled. Additionally, the child must be younger than the taxpayer, and younger than their spouse if filing jointly, unless the child is permanently and totally disabled.
The Residency Test
The Residency Test stipulates that the child must have lived with the taxpayer for more than half the year. Temporary absences for reasons such as illness, education, military service, or vacation are generally counted as time lived with the taxpayer. Exceptions apply for children of divorced or separated parents, detailed in the next section.
The Support Test
Under the Support Test, the child cannot have provided more than half of their own financial support for the year. This means the taxpayer must have contributed more than 50% of the child’s total living expenses, including food, lodging, clothing, education, and medical care.
The Joint Return Test
The Joint Return Test states that the child cannot file a joint tax return for the year. An exception exists if the child files a joint return solely to claim a refund of withheld income tax or estimated tax paid, and neither the child nor their spouse would have any tax liability on separate returns.
Claiming a Child When Parents Are Not Married or Separated
When parents are not married or are separated, determining who can claim a child as a dependent requires specific considerations. Only one parent can claim a child as a dependent for tax purposes, even if both parents might otherwise meet the general eligibility criteria.
The general rule in these situations is that the custodial parent is entitled to claim the child. The custodial parent is the parent with whom the child lived for the greater number of nights during the tax year. This rule applies even if the custodial parent did not provide more than half of the child’s support.
An exception allows the noncustodial parent to claim the child. This is facilitated by IRS Form 8332, “Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent.” The custodial parent signs Form 8332 to release their claim, allowing the noncustodial parent to attach it to their tax return. This form can be used for a single year or for multiple future years.
If unmarried parents live together with the child, only one parent can claim the child. If both attempt to, the IRS tie-breaker rules, discussed in a later section, determine who is eligible.
Associated Tax Benefits
Claiming a qualifying child as a dependent unlocks several tax benefits that can significantly reduce a taxpayer’s liability. These benefits are tied to the dependent status.
The Child Tax Credit (CTC)
The Child Tax Credit (CTC) offers up to $2,000 per qualifying child. This credit directly reduces the amount of tax owed, and a portion of it may be refundable, meaning taxpayers could receive money back even if they owe no tax.
Credit for Other Dependents (ODC)
For dependents who do not qualify for the Child Tax Credit, the Credit for Other Dependents (ODC) may be available. This nonrefundable credit can provide up to $500 per qualifying dependent.
The Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is designed to assist low-to-moderate income working individuals and families. Having a qualifying child can increase the amount of EITC a taxpayer can receive, and it is a refundable credit.
Head of Household Filing Status
Claiming a qualifying child can enable a taxpayer to file as Head of Household, a filing status that often results in a lower tax rate than filing as single. To qualify, the taxpayer must be unmarried and have paid more than half the cost of keeping up a home for the child.
The Child and Dependent Care Credit
The Child and Dependent Care Credit helps taxpayers recover some of the expenses paid for the care of a qualifying child or other dependent, allowing the taxpayer to work or look for work. This credit is a percentage of eligible care expenses, with the percentage varying based on the taxpayer’s income.
IRS Tie-Breaker Rules and Disputed Claims
In instances where multiple individuals could potentially claim the same child, the IRS employs specific tie-breaker rules to determine who is eligible. These rules provide a hierarchy for resolving such disputes.
If one of the individuals is the child’s parent, the parent will be entitled to claim the child over a non-parent. If both parents can claim the child and do not file a joint return, the child is treated as the qualifying child of the parent with whom the child lived for the longer period during the year. If the child lived with both parents for an equal amount of time, the parent with the higher Adjusted Gross Income (AGI) claims the child.
When both parents or other taxpayers claim the same child on their tax returns, the IRS will identify the duplicate claim. The IRS may send a notice to both parties involved, informing them of the conflicting claims.
The IRS will apply its tie-breaker rules to determine the correct claimant. The taxpayer who is ultimately deemed ineligible to claim the dependent will need to amend their tax return. Failing to amend or continuing to claim the child incorrectly can lead to penalties and interest on any underpaid taxes.