How Much Money Can a Child Make and Still Be a Dependent?
Learn the income thresholds and rules determining if your child can still be claimed as a dependent for tax benefits.
Claiming a child as a dependent on a tax return can unlock various tax benefits for the taxpayer. Understanding the specific rules and income limitations is essential to accurately determine eligibility and maximize these advantages.
Understanding Dependent Categories
The Internal Revenue Service (IRS) categorizes dependents into two primary types: a “Qualifying Child” and a “Qualifying Relative.” Each has distinct criteria, including tests related to relationship, age, residency, support, and whether the individual files a joint tax return.
The specific income rules differ considerably between these two classifications. A Qualifying Child generally does not have a direct gross income limit, while a strict income threshold applies to a Qualifying Relative. The child’s support plays a crucial role in determining eligibility for both categories, particularly how it impacts the support test.
Gross Income Test for Qualifying Relatives
The gross income test is a key determinant for claiming someone as a “Qualifying Relative.” For the 2024 tax year, an individual cannot have a gross income of $5,050 or more to be claimed under this category. This threshold increases to $5,200 for the 2025 tax year.
Gross income includes all taxable income received, such as wages, business income, rental income, and taxable unemployment or Social Security benefits. If a child’s total gross income, whether from earned or unearned sources, meets or exceeds this limit, they cannot be claimed as a Qualifying Relative, regardless of the financial support provided by the taxpayer.
How a Child’s Income Affects the Support Test for Qualifying Children
For a “Qualifying Child,” there is no direct gross income limit. Instead, the child’s income indirectly affects eligibility through the support test. A child cannot have provided more than half of their own total support for the tax year to be considered a Qualifying Child.
Support includes expenses for basic necessities like food, lodging, clothing, education, medical and dental care, recreation, and transportation. To determine if the child provided more than half of their own support, the total amount spent on their well-being is calculated and compared to the child’s contributions.
For example, if a child’s earnings are substantial and they use a significant portion to cover living expenses, such as rent or food, they might inadvertently provide more than half of their own support, thereby disqualifying them as a dependent. Certain items, like federal, state, and local income taxes paid by the child or scholarships received by a student child, are generally not included in the support calculation.
Other Dependency Qualifications
Beyond income and support, several other tests must be satisfied for a child to be claimed as a dependent. The Relationship Test requires the child to be the taxpayer’s son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of these.
Age Test
The Age Test stipulates that a Qualifying Child must be under 19 at the end of the tax year, or under 24 if a full-time student. There is no age limit if the child is permanently and totally disabled.
Residency Test
The Residency Test mandates that the child must have lived with the taxpayer for more than half of the year, though temporary absences for school, medical care, or vacation are allowed.
Joint Return Test
The Joint Return Test specifies that a dependent generally cannot file a joint tax return for the year, unless filed solely to claim a refund of withheld income tax or estimated tax paid, and no tax liability exists for either spouse on separate returns.
Tax Benefits and Considerations for Dependents
Being claimed as a dependent carries specific tax implications for both the dependent and the taxpayer. For the dependent child, their standard deduction is limited. For the 2024 tax year, a dependent’s standard deduction is the greater of $1,300 or their earned income plus $450, but it cannot exceed the basic standard deduction for their filing status. This limitation affects how much of their income is subject to tax.
For the taxpayer, claiming a child as a dependent can lead to eligibility for tax credits. The Child Tax Credit can be worth up to $2,000 per qualifying child for the 2024 tax year, with up to $1,700 refundable through the Additional Child Tax Credit. To qualify, the child must be under 17 at the end of the tax year. If a child does not qualify for the Child Tax Credit (e.g., they are 17 or older), the taxpayer may still be eligible for the Credit for Other Dependents, which provides a non-refundable credit of up to $500 for the 2024 tax year.
The “Kiddie Tax” applies to children with significant unearned income, such as from investments. For 2024, if a child’s unearned income exceeds $2,600, a portion may be taxed at the parent’s marginal tax rate, rather than the child’s lower rate. The first $1,300 of unearned income is tax-free, and the next $1,300 is taxed at the child’s rate.