Who gets to claim the dependent? Rules for tricky cases

During tax time, claiming a dependent can mean the difference between a refund and a balance due. Even one dependent could qualify your taxpayer for the earned income tax credit, dependent credit, credit for other dependents, or other credits that require a qualifying dependent like the child and dependent care credit.  

Help your clients determine if they can claim their dependents by reviewing these scenarios before next season. 

Who can qualify as your dependent? 

Is there a reference that explains what a U.S. resident alien is?  

Yes, the IRS defines it. A U.S resident alien (for federal tax purposes) is someone who meets either the green card test or the substantial presence test. For details (and exceptions), use IRS Publication 519, U.S. Tax Guide for Aliens.   

For a qualifying relative, can someone be claimed if they make more than $5,200 but are on disability?  

Generally, no. For a qualifying relative, the dependent’s gross income must be below the gross income test threshold (unless an exception applies). Disability benefits can sometimes be excluded from gross income depending on the type. There is a narrow exception for certain income earned by a permanently and totally disabled person at a sheltered workshop, because that income is not counted for the gross income test. 

Does Social Security Disability Insurance (SSDI) count as support?   

It depends. For a qualifying child, the support test does not include income from SSI if the taxpayer is the actual recipient of the payments to be used to support another individual. For a qualifying relative, the support test includes income from SSI because the relative is typically the recipient, not the taxpayer, and must treat the governmental payments as support provided by a third party.   

Can I still claim my child? 

Can a parent claim a child, under age 18, who has a job and pays their own bills?   

Possibly. If the child meets the qualifying child tests (relationship, age, residency, joint return and support), the parent can still claim them. The key is whether the child provided more than half of their own support. 

Can a married child be claimed as a dependent?   

Yes, potentially, if they meet the dependency tests and do not file a joint return with their spouse (unless they are filing only to claim a refund and no tax liability would exist on separate returns). 

If the child’s spouse is the one who provides the majority of the child’s support, can the parent still claim the child?  

Usually no. If the child provides over half of their own support (including support considered as provided by the child, such as support from a spouse in certain circumstances), they generally won’t meet the support test to be the parent’s qualifying child. 

What happens in a divorce? 

If Form 8332, Release/Revocation of Release of Claim to Exemption for Child, is signed, do we have to paper-file or attach it?   

No. The noncustodial parent must attach Form 8332, or a substantially similar statement if permitted, to the return for each year the child is claimed under that release. You can claim the exemption only if the other dependency tests in the instructions for your tax return are met. You can usually e-file and attach Form 8332 if your software supports it. If you cannot attach it electronically, you will need to paper-file the return with the form included. Most software providers allow attachments to electronically filed returns. 

If I have a signed Form 8332 but the child didn’t live with me for more than half the year, can I still indicate that the child lived with me for more than half the year?   

No. Form 8332 doesn’t change where the child lived, which matters more for residency-based credits. It allows the noncustodial parent to claim the child tax credit (CTC) and the other dependent credit (ODC), not residency-based items like the earned income credit (EIC) or head of household (HOH). 

If a divorce decree says ‘shared custody’ with both parents, but the child lived with one parent more nights, does that parent still qualify as the custodial parent?  

Yes. The IRS, not the decree, defines the custodial parent as the one the child lived with more than half the year (more nights). The noncustodial parent may claim certain benefits only if released by the custodial parent with Form 8332, but HOH and the EIC generally follow residency. 

When determining who provided more than half the child’s support, who gets credit for child support payments?  

For the qualifying child support test, child support is treated as support provided by the child, not the parent who pays it. This means it typically counts as support provided by the child’s own funds. For other dependency-related tests (like qualifying relative support), support is attributed to the person who actually pays it (including child support payments).   

Choosing the right option 

Determining if you can claim your child or the niece that’s staying with you for the school year might not be as simple as reporting their Social Security number on a tax form. Help your clients qualify their dependents by knowing the rules before the next tax season.