If you are filing a joint tax return, your spouse is not your dependent but your children are. In some instances, there can be others that you would claim as a dependent. The two categories would either be a "qualifying child" or a "qualifying relative". Let's discuss.
There are five steps to qualify a child as a dependent:
1. Relationship – The obvious and most common would be your children. In some instances, there could be others that meet this requirement. To meet this test, in addition to children, a child could be your stepchild, foster child, or a descendant of any of them (ex: grandchild). This test would also include your brother, sister, half siblings or descendants of any of them (ex: niece).
2. Residency – The child must have the same residence as you for more than half of the year.
3. Age – The person must be under the age of 19 at the end of the year in question AND younger than you (under the age of 24 if they are a full time student). They can be any age if they are permanently disabled.
4. Support – The person must not provide more than half of their support during the year.
5. Joint Return – The child cannot file a joint return for the year. For example, if you are trying to claim your daughter and she is married. If she files a tax return with her husband, you usually cannot also claim her.
There are four tests that will qualify a relative as a dependent:
1. They cannot be a "qualifying child" per the previous description.
2. Gross Income – the dependent must earn less than $3,900 in 2013. Always check on this number as the amount will change.
3. Support Test – You provide more than half of their support for the year.
4. Member of Household or Relationship – The person must live with you all year as a member of your household or be one of the relatives that doesn’t have to live with you (see IRS Publication 501 for a list of qualifying relatives).
*Remember, if you have a child during the year, they will be your dependent on the tax return for that year. Be sure to tell your tax preparer that you had a child and provide the child's legal name and social security number (as it would appear on the social security card).
As always, there can always be exceptions to some of these rules. When in doubt, contact a professional and/or refer to IRS publication 501 for guidance.
As always, we recommend that you discuss the specifics of your situation with a CPA firm.