It’s my annual “Taxes from A to Z” series! Next up:
Personal exemptions are beneficial because they reduce your total taxable income. You generally can claim one personal exemption for yourself and, if you are married, one for your spouse. The exemption for your spouse is just called an exemption: your spouse is never considered your dependent.
In addition to personal exemptions for yourself and your spouse, you can generally claim an exemption for each of your dependents. If you are entitled to claim an exemption for a dependent, your dependent cannot claim a personal exemption on his or her own tax return. You can, however, claim an exemption for a dependent even if your dependent files a return.
A dependent is your qualifying child or qualifying relative. This post focuses on the tests to be your qualifying relative. They are:
- Not a qualifying child test. A child is not your qualifying relative if the child is your qualifying child or the qualifying child of any other taxpayer.
- Member of household or relationship test. A qualifying relative must live with you all year as a member of your household or be related to you as your child, stepchild, foster child, or a descendant of any of them; your brother, sister, half brother, half sister, stepbrother, or stepsister; your father, mother, grandparent, or other direct ancestor, but not foster parent; your stepfather or stepmother; a son or daughter of your brother or sister; a son or daughter of your half brother or half sister; a brother or sister of your father or mother; and your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
- Support test. To meet this test, you generally must provide more than half of a person’s total support during the year. You figure this by comparing the amount you contributed to that person’s support with the entire amount of support that person received from all sources. Total support includes amounts for food, lodging, clothing, education, medical care, transportation and other necessities.
- Gross income test. This is an easy one. To meet this test, a person’s gross income for the year must be less than $3,950 ($4,000 for 2015). If that number rings a bell, it’s because your dependent’s gross income much be less than the personal exemption amount (see below). Gross income includes money and services not otherwise exempt from tax (that means, for example, that certain Social Security aren’t included).
Each personal exemption is worth $3,950 for 2014. You figure the number of dependents at line 6 on your 1040.
You figure the total amount of the personal exemptions at line 42 on your 1040.
If you meet all of these tests, you’re good. There’s no age limit for a qualifying relative or other hoops to jump through. However, there are some additional considerations if your income is over a certain amount or if you’re divorced.
If you fail any of these tests for a qualifying relative, you cannot claim that dependent for purposes of the personal exemption.
If you have any questions about whether you can claim a qualifying relative, check with your tax professional.
