During tax season, many taxpayers find themselves navigating through a maze of forms, and one question that often arises during this process is: Can you claim yourself as a dependent for tax purposes? This might seem like an appealing option—after all, who wouldn't want to take advantage of additional tax benefits to reduce their taxes owed? To answer this question, it’s necessary to understand what a dependent is and how someone qualifies as a dependent for tax purposes.
What Is a Dependent in the Context of U.S. Tax Laws?
A dependent, as defined by the Internal Revenue Service (IRS), is "a person other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption," i.e. someone they support financially.
By that definition alone, the IRS excludes individuals from claiming themselves as dependents on their own tax return. However, you can claim other people as dependents or be claimed as a dependent on someone else's tax return.
What Are the Benefits of Claiming a Dependent on a Federal Tax Return?
Claiming a dependent might make the taxpayer eligible for certain tax credits and deductions. These credits can lower their tax bill, potentially saving them a considerable amount of money.
However, there are strict rules for dependents and not everyone qualifies. It is wise to consult with a tax planning professional to determine the best strategy for your tax return.
The Rules for Claiming a Dependent
There are two qualifying dependent categories. For both of these, the dependent must be a U.S. citizen, national, or resident alien or be a resident of Mexico or Canada.
Qualifying Child
The following tests apply when claiming qualifying children:
Relationship. They must be related to the claimant, e.g. their child, stepchild, foster child, sibling, or a descendant of these.
Age. They must be under 19 at the end of the tax year, or under 24 if a full-time student. Permanently and totally disabled children are exempt from the age test.
Residency. They must have lived with the claimant for more than half the year.
Support. The claimant must provide more than half of their total support for the year.
Joint return. They must not be filing jointly with anyone unless it's solely to claim a refund for tax withheld on their paycheck.
Qualifying Relative
Qualifying relatives are subject to these rules:
Related or household member. They must either be a relative of the claimant or a non-relative who has lived with the claimant all year as a member of their household.
Gross income. For the 2023 tax year, the relative or household member’s gross income must be less than $4,700.
Support. The claimant must provide more than half of their total support for the year.
Not a qualifying child. They must not be eligible as anyone’s qualifying child.
Exemptions Available Before the Tax Cuts and Jobs Act of 2017
While you can't claim yourself as a dependent, there used to be a provision in the tax code that allowed for personal and dependent exemptions. These exemptions, which existed prior to the Tax Cuts and Jobs Act of 2017, allowed you to deduct a certain amount from your taxable income for yourself and each of your dependents.
The TCJA eliminated these exemptions for the tax years 2018 through 2025, removing the personal exemption, but nearly doubling the standard deduction. It remains to be seen if the personal and dependent exemptions will be re-established after 2025.
What Are the Benefits of Being Claimed as a Dependent?
While it might seem counterintuitive, there are circ*mstances in which allowing another person to claim you as a dependent on their tax return can be advantageous.
Reduced Tax Liability for the Claimant
When someone claims you as a dependent, they're often able to reduce their taxable income. This can result in significant savings on their tax bill, which may indirectly benefit you if that person is supporting you financially.
Access to Certain Credits and Deductions
The claimant may be eligible for certain tax credits and deductions, such as one or more of the following:
Child Tax Credit. This is for parents with dependent children under the age of 17. The amount of the CTC in 2023 is up to $3,000 per child.
Earned Income Tax Credit (EITC). This is a refundable earned income credit for low- to moderate-income working individuals or couples. The benefit depends on the recipient's income and number of qualifying children. In 2023, $7,430 is available when claiming three or more children.
Child and Dependent Care Credit. The Child and Dependent Care Credit is a tax incentive provided to parents or caregivers. It's designed to help defray the costs of approved care services, such as daycare, for dependents who cannot take care of themselves.
Education credits. These include the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC). They can offset the cost of education by reducing the amount of taxes owed to the government.
Student loan interest deduction. This deduction covers the interest paid on student loans up to $2,500.
Support for Education Expenses
Parents who claim their child as a dependent can potentially use 529 plan distributions tax-free for the child's qualified education expenses.
Why You Need to Know if You’re Someone’s Dependent
Every tax credit and deduction available has specific eligibility requirements, so it's important to choose the correct filing status, understand the rules, and know how they apply to your situation. Let's look at one example demonstrating this.
Example
Let's say you live at your parents' house in Jacksonville, Florida, qualify as their dependent, and attend the local college. The tax code allows your parents to claim tax credits related to the money they have paid during the year for your college education. However, they can only receive these benefits if you are claimed as a dependent on their joint return and their income is below $180,000. If their income is more than $180,000, they can opt to not claim you as a dependent, allowing you to file your own tax return and claim the education tax credit benefits yourself.
As you can see in this situation, it would be crucial to communicate with your parents before filing your tax returns to guarantee that the education tax credit is claimed on only one return.
Seek Professional Tax Advice
Your eligibility for many tax credits and benefits hinges on whether you are classified as someone else's dependent or if you can claim someone as your dependent. Errors in your tax filing status, whether due to simple oversights or misunderstanding of tax laws, can lead to serious repercussions, including IRS fines and legal proceedings.
Given these ramifications, it is strongly recommended to seek assistance from a tax professional. They can help you avoid common errors, ensure compliance with tax laws, and provide peace of mind that your tax affairs are in order.
