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If you continue to financially support your adult children, are you eligible to claim them as dependents?
©iStockphoto.com/DenGuyYou might have once envisioned your empty-nest years with a mix of pride and nostalgia, similar to the emotions felt on the first day of kindergarten. However, if you're among the many parents with adult children still at home (or who never left), you may be questioning if those empty-nest years will ever arrive.
As more adult children return home after college or stay while attending school or navigating a challenging job market, many parents find themselves supporting their grown children well beyond age 18. A 2011 Rutgers University study revealed that nearly 48% of college graduates from 2006 to 2010 still depend on their parents for financial assistance. Additionally, Twentysomething, Inc. predicts that up to 85% of 2011 college graduates will move back home after graduation.
According to the U.S. Department of Agriculture, middle-class families will spend approximately $222,360 to raise a child born in 2009 until they turn 17. (The USDA has been providing these estimates since 1960 to assist in setting child support and foster care reimbursement guidelines—yes, they do more than just grade meat!) This figure does not include college expenses, and as any parent with children over 17 knows, the years beyond that age can be the most financially challenging.
If you're still covering your adult children's groceries, assisting with their cell phone bills and car insurance, and providing them with housing (hopefully, you're not still doing their laundry!), you might wonder if you can claim them as dependents during tax season. The answer? Sometimes. Keep reading to learn more.
The Case of the Qualifying Child
Fortunately, in many situations, you can claim your adult child as a dependent. To clarify when this is permissible, the IRS has established a series of straightforward tests. Of course, "straightforward" by IRS standards means you might need some patience to navigate the details.
First, the adult who's consuming all your hot water and leaving the milk out (no, not your spouse—the other one) must qualify as either a qualifying child or a qualifying relative. To be considered a qualifying child, they must meet all the following conditions:
- The individual must be your son, daughter, stepchild, foster child, sibling, half-sibling, step-sibling, or a descendant of any of these.
- The child must be younger than you or your spouse if you're filing jointly. (This is obvious for your own children but relevant for siblings or stepchildren.)
- The child must be under 19 by the end of the tax year, or under 24 if they are a full-time student. (If your 28-year-old unemployed child still lives in your basement, don't worry—there's another test for that on the next page.)
- The child must have lived with you for more than half the year.
- The child must not have provided more than half of their own financial support for the year.
- The child must not have filed a joint return with someone else, except to claim a refund.
If your child meets the qualifying child criteria, you're nearly done—just a few more conditions to fulfill. If not, don't lose hope. Continue reading to see if your dependent qualifies under the qualifying relative test.
The Case of the Qualifying Relative
This is where things become a bit more complex. According to the IRS, your child can qualify as a qualifying relative even if they don't meet the criteria for a qualifying child. However, they cannot be classified as both a qualifying child (for you or anyone else) and a qualifying relative.
To claim your adult child as a qualifying relative, they must meet all the following requirements:
- The adult child must be your biological child, stepchild, foster child, or a descendant of any of these.
- Alternatively, they can be your sibling, half-sibling, step-sibling, niece, nephew, son-in-law, or daughter-in-law.
- The child's gross income must not exceed $3,650 for the year.
- You must have provided over half of their total financial support during the tax year.
Keep in mind that an adult child who meets the relationship criteria doesn't necessarily have to live with you to qualify as a dependent. If you provide more than half of their total support for the year and their income is below $3,650, you may still be eligible to claim them.
Even if your finances seem to vanish whenever your adult child is nearby, and they don't meet the criteria for either a qualifying child or a qualifying relative, you still might be able to deduct health insurance premiums for children up to age 27, regardless of their dependent status. For more information, consult your tax advisor or visit the IRS website.
If your child meets one of the tests mentioned, continue reading to determine if you satisfy the three additional requirements needed to claim them as a dependent.
The age restrictions for qualifying children do not apply to those who are permanently and totally disabled. Additionally, the term qualifying relative can include parents, aunts, uncles, and others under your care. For this discussion, we're focusing on adult children who are mentally and physically capable of self-care.
The Moment of Truth
Once you've confirmed that your child qualifies as either a qualifying child or a qualifying relative, the remaining three tests are straightforward:
- The dependent taxpayer test: If someone else can claim you (or your spouse, if filing jointly) as a dependent, you cannot claim anyone else as a dependent—even if they are your qualifying relatives or children. (On the bright side, if someone else can claim you, you can understand what your adult children are putting you through. Maybe remind them to pick up their wet towels!)
- The joint return test: If your child files a joint return with someone else, you cannot claim them as a dependent, unless the return is solely for claiming a refund.
- The citizen or resident test: You can only claim a person as a dependent if they are a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. (Exceptions apply for certain adopted children.)
If your child qualifies as a qualifying child or relative, neither you nor your spouse can be claimed as dependents by someone else, your adult child isn't filing a joint return, and they meet the citizenship requirements, then yes—you can claim your adult child as a dependent on your tax return.
