Who Qualifies for the Dependent Exemption?

Claiming a dependent on your tax return can provide valuable exemptions and credits, reducing taxable income and potentially increasing your refund. However, the IRS has strict guidelines to determine eligibility, based on factors such as relationship, residency, financial support, and income.

Relationship Requirements

The IRS defines a dependent as either a qualifying child or a qualifying relative. A qualifying child includes biological children, stepchildren, foster children, siblings, half-siblings, or their descendants, such as grandchildren, nieces, or nephews. The child must be younger than the taxpayer and under 19 at the end of the tax year, or under 24 if a full-time student for at least five months. There is no age limit if the individual is permanently and totally disabled.

A qualifying relative includes parents, grandparents, aunts, uncles, in-laws, and others who lived with the taxpayer for the entire year. Unlike a qualifying child, there is no age restriction, but the individual cannot be someone else’s qualifying child. A qualifying relative does not need to be younger than the taxpayer, allowing elderly parents to be claimed.

Residency Rules

A qualifying child must have lived with the taxpayer for more than half the year—at least 183 days in most cases. Temporary absences, such as time away for school, military service, or medical care, do not count against this requirement if the individual intends to return home. A college student living on campus, for example, is still considered a resident of their parents’ home if they return during breaks.

A qualifying relative does not need to live with the taxpayer unless they do not meet the IRS’s specified family relationships. If they are not closely related under IRS definitions, they must have lived in the taxpayer’s home for the entire year.

Non-U.S. citizens generally cannot be claimed as dependents unless they are a U.S. resident alien, U.S. national, or a citizen of Canada or Mexico. This rule can affect families with foreign-born relatives who do not meet residency tests under immigration law.

Support Tests

A dependent must not provide more than half of their own financial support during the tax year. Support includes food, housing, utilities, medical expenses, education costs, and recreational activities. The IRS considers both direct payments made on behalf of the dependent and indirect contributions, such as covering rent or insurance.

Scholarships do not count as self-support, even if they cover tuition, room, and board. However, if a dependent uses their own earnings for living expenses, those amounts factor into the support test. Social Security benefits received by a dependent may or may not count, depending on whether they are used for personal expenses or saved.

If multiple individuals contribute to a dependent’s support—such as siblings supporting an elderly parent—only one person can claim the exemption. The IRS allows a Multiple Support Agreement (Form 2120) when no single provider covers more than 50% of expenses, enabling relatives to designate one taxpayer to take the exemption.

Income Limits

A qualifying relative’s gross income must not exceed the annual threshold set by the IRS, which is $4,700 for the 2023 tax year. This includes wages, interest, dividends, rental income, and other taxable compensation. Non-taxable income, such as certain Social Security benefits or tax-exempt interest, generally does not count toward this limit unless used for personal expenses.

Investment income can complicate eligibility, particularly for dependents with significant holdings. Unearned income, such as dividends and capital gains, is subject to Kiddie Tax rules, which impose higher tax rates once income exceeds certain thresholds. If a dependent’s investment earnings surpass the standard deduction for single filers—$13,850 in 2023—they may be required to file their own tax return, potentially disqualifying them as a dependent.

Divorced or Separated Situations

When parents are divorced or legally separated, the custodial parent—the one with whom the child resides for the greater number of nights during the year—has the right to claim the exemption, even if the noncustodial parent provides financial support.

If the custodial parent agrees to waive their right to the exemption, they must sign IRS Form 8332, allowing the noncustodial parent to claim the child. This form must be attached to the noncustodial parent’s tax return each year they claim the exemption. Without this signed release, the IRS will default to awarding the exemption to the custodial parent.

Certain tax benefits, such as the Earned Income Tax Credit (EITC) and Head of Household filing status, remain exclusively available to the custodial parent, even if the exemption is transferred.

If custody is split exactly 50/50, the IRS applies a tiebreaker rule, granting the exemption to the parent with the higher adjusted gross income (AGI). This prevents both parents from claiming the child in the same tax year, which could trigger an audit or delay refunds. Parents with joint custody agreements should review their divorce decree and communicate about tax filings to avoid conflicts.