It’s my annual “Taxes from A to Z” series! If you’re wondering whether you can claim home office expenses or whether to deduct a capital loss, you won’t want to miss a single letter.
Q is for Qualifying Relative.
If you take care of someone who is not your qualifying child, you may be able to claim that person as a dependent if he or she is a qualifying relative. A person is your qualifying relative if that person meets all of these tests:
- Not a qualifying child test. A person is not your qualifying relative if he or she is your qualifying child or the qualifying child of any other taxpayer.
- Member of household or relationship test. To meet this test, a person must either 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 (for example, your grandchild); 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; or one of your in-laws (including your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law).
- Gross income test. To meet this test, a person’s gross income for 2017 must be less than $4,050. Gross income is all income in the form of money, property, and services not exempt from tax. That means that Social Security benefits are excluded if they are not taxable.
- Support test. To meet this test, you generally must provide more than half of a person’s total support during the calendar year.
You’ll notice there is no test for age on the list. Unlike the criteria for determining whether a person might be a qualifying child, there is no age test for a qualifying relative. A qualifying relative can be any age so your parent or grandparent could qualify so long as he or she meets the other criteria.
There is also no specific residency test for a qualifying relative. Your parent, in-law or other qualifying relative doesn’t actually have to live with you: he or she can live in his or her own home, a nursing home or an assisted living facility and still qualify as your dependent so long as he or she meets the other criteria.
And don’t forget that, for U.S. tax purposes, in addition to being your qualifying child or qualifying relative, a dependent must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico and have a valid tax ID number.
For 2017 (the tax return you’re filing now), you can deduct a personal exemption amount for your dependent. The exemption amount reduces your taxable income, so generally, the more dependents, the larger the deduction (it’s really an exemption but it acts as a deduction). The personal exemption amount for 2017 is $4,050, the same as in 2016. Phaseouts apply.
As a result of tax reform, the rules for 2018 (the return that you’ll file next year, in 2019) have changed. There is no personal exemption amount. The Child Tax Credit is still in place even though it looks a little different. The child credit also includes a $500 non-refundable credit, referred to as a “family credit” for dependents other than qualifying children (in other words, a qualifying relative, though the gross income test may also look a little different).
For your taxes from A to Z, here’s the rest of the series:
- A is for Annual Contribution Limits
- B is for Bonus
- C is for Choate
- D is for Direct Deposit
- E is for Enrolled Agent
- F is for Found Money
- G is for Ghost Preparer
- H is for Hobby Loss Rules
- I is for Installment Agreement
- J is for Joint Accounts
- K is for Kin (Crypto)
- L is for Line of Credit
- M is for Mileage
- N is for NIIT
- O is for Organ Donations
- P is for Private and Parochial Schools