Who Can Be Claimed as Dependents on Tax Returns and What Benefits Do They Provide?

Having dependents significantly affects a taxpayer’s filing status, as well as the amount of taxes calculated on their income. Additionally, having family members who are supported by the taxpayer gives them the right to claim Head of Household status and access various tax deductions, credits, and benefits.

Thus, claiming a dependent on your tax return is primarily financially beneficial, as this fact allows you to save on taxes.

Tax Credits and Deductions for Dependents

Generally, tax benefits are based on the number of dependents you claim. These benefits include:

• Child Tax Credit

• Credit for Other Dependents (ODC)

• Dependent Care Credit

• Earned Income Tax Credit (EITC)

• Adoption Credit

Child Tax Credit

The Child Tax Credit can be up to $2,200 per child under age 17 (as of December 31). Significantly, up to $1,700 of this amount is refundable as the Additional Child Tax Credit (ACTC), meaning you may receive a refund even if you owe no tax.

Credit for Other Dependents (ODC)

This $500 credit applies to children and adults who don’t meet the qualifying requirements for child dependents. This may be due to their age (over 17 years) or lack of a Social Security number.

To qualify for the ODC, the dependent:

• Must be claimed on your tax return.

• Cannot be used to claim the Additional Child Tax Credit.

• Must be a U.S. citizen or resident alien.

Dependent Care Credit

The actual credit amount you can receive is calculated based on your income and the amount you spend on child care (such as daycare or sitters) to allow you to work.

Earned Income Tax Credit (EITC)

This credit is designed for taxpayers with low or moderate income. To qualify for this credit, you must have earned income, such as from wages, commissions, disability benefits, or self-employment.

Below are the Maximum Adjusted Gross Income (AGI) limits and maximum tax credit amounts for the tax year 2025:

Adoption Credit

Individuals who adopted a child are entitled to receive this credit to cover adoption-related expenses.

• To qualify, you must be a U.S. citizen or resident alien for the entire tax year. If you’re married, this applies to your spouse as well.

• If a person adopted multiple children, they are entitled to receive additional credit for each child.

Education Credits

Additionally, you can also claim the American Opportunity Tax Credit (available for 4 years) and the Lifetime Learning Credit (available for life) to cover education-related expenses for yourself and your dependents.

Who Is Entitled to Claim Credits?

Only one person from the family can claim a specific dependent on their tax return.

For example, if you have a child, they can be listed either on your return or on your spouse’s return. This rule applies even if you are divorced; only one parent can claim the child for that tax year.

It is also necessary to consider that if you are a dependent yourself, you cannot claim family members dependent on you.

Dependent Qualification: Children and Relatives

All dependents qualify under two specific IRS categories: Qualifying Children and Qualifying Relatives.

Dependents – Children

This category assumes that the child supported by the taxpayer is their relative, but being their biological parent is not required. You can be their biological sibling, aunt, uncle, adoptive parent, grandparent, stepparent, or step-sibling.

• Age Limit: A child can be considered a dependent only until age 19.

• Students: If they are pursuing higher education, you can continue to claim them as a dependent until they turn 24.

• Support Test: If the child works, they must not earn more than half of their own annual support.

• Disability: As for children with permanent and total disabilities, there are no age restrictions.

• Residency: Your child must live with you for more than 6 months of the year. Time spent at college isn’t considered living separately, as it’s expected they will return to your home as their primary residence.

Dependents – Relatives

If you support an adult relative, they can also be claimed as a dependent when completing your tax return.

• Close relatives (such as parents, grandparents, siblings, nieces, or nephews) do not have to live with you throughout the year to qualify.

• Distant family members must meet the joint residence requirement, meaning they must live with you for the entire reporting period.

Unsure if a family member meets these requirements? You can use the official IRS tool Whom May I Claim as a Dependent? to verify your specific situation.

How to Claim Dependents and Tie-Breaker Rules

To claim someone as a dependent in complex support situations, you may need to file Form 2120 Multiple Support Declaration with the IRS.

If you and your spouse or other relatives can’t decide who will claim the child, the IRS will intervene. The IRS uses specific control criteria (tie-breaker rules) to determine which claimant has the legal right to claim the child.

Priority is given in this order:

1. A mother or father (parents take priority over other relatives).

2. The parent with whom the child lived the longest during the year.

3. The parent with the higher Adjusted Gross Income (AGI), if it’s impossible to determine with whom the child actually spent more time.

4. If neither taxpayer is the child’s parent, the taxpayer with the higher AGI can claim the child.

Correcting Errors

If you believe someone incorrectly claimed a dependent that belongs on your return, you need to file a tax return claiming that dependent. You must be prepared to prove that you have the legal right to claim the child or adult supported by you.

The IRS provides a list of acceptable proof documents in Form 886-H-DEP.

After you file your application, both you and the other taxpayer will receive a letter proposing that you both correct your returns.

Conclusion

As stated above, having dependents provides significant tax payment reductions and the ability to use valuable benefits and credits.

However, it should be remembered that claiming dependents on a return without legal grounds is a serious offense. Individuals found guilty of tax fraud regarding dependents can be fined up to $100,000, imprisoned for up to 3 years, or both.

How Gennadiy Arnautov CPA Can Help?

Correctly determining dependents on your tax return can open access to important tax benefits and credits, but IRS rules in this area have many exceptions and conditions. Our specialists will help:

• Determine exactly who you have the right to claim as a dependent based on residency and support tests.

• Correctly apply tax credits (CTC, ODC, EITC) and benefits related to dependents.

• Complete the return according to IRS requirements and avoid costly errors.

• Plan tax strategy considering your specific family situation and future changes.

Don’t lose tax benefits due to formal errors! Correctly claimed dependents can significantly reduce your tax bill or increase your refund.

Contact Gennadiy Arnautov CPA for professional consultation and confidence in your tax reporting.