How Long Do Kids Stay Dependents?

Updated: February 2024 (To include all figures for filing 2023 taxes)

Once you are a parent, you never stop being a parent. You stayed up with your kids when they had the flu, helped them study for the ACT, cheered them on at their graduation. You have been there for their highs, lows, and everything in between. You will continue to care, love, and support your children for the rest of your life.

But will there ever be a time they can fly away from the nest?

According to the federal government, the answer is yes!

From the time your children were born, you claimed them as dependents on your federal and state taxes, which has saved you money on your taxes over the years. The decision to claim children as dependents rests on a myriad of factors, let’s see how those could affect you this year.

In the Nest – How Long You Can Claim

The federal government allows you to claim dependent children until they are 19. This age limit is extended to 24 if they attend college. If your child is over 24 but not earning much income, they can be claimed as a qualifying relative if they meet the income limits and/or if they are permanently disabled. It is important to know that there is no age limit if your child is permanently disabled.

Other factors that contribute to your ability to claim your children as dependents are:

• Amount of time your children live with you
  • Your child must live with you for at least 6 months before you can claim them as a dependent.
• Financial support
  • If your child makes more than half of their own support during the tax year, they cannot be claimed as a dependent. This support consists of housing, food, education, medical care, insurance, and recreational spending.
• Marital Status
  • If you are not married and the child lived with you and the other parent half of the time, the person with the highest adjusted gross income will often take the deduction. This, however, can be negotiated.
  • If you pay child support but the child lives with you for less than half of the year, you cannot claim the child as a dependent unless you have a signed Form 8332.

Still unclear if you can claim your child as a dependent? The IRS has a questionnaire here you can use to find out. Simply answer a few questions and the IRS will tell you whether or not you are eligible to claim a person as your dependent on your taxes.

For many families, the longer they are able to claim their children as dependents the better it will be. But the new Tax Cuts and Job Act has changed the way parents claim dependents. Prior to 2018, parents were able to receive a personal exemption that reduced taxable income. For example, in 2017, a married couple filing jointly could take a $4,050 exemption for themselves and each dependent. The new tax law has suspended that exemption benefit from 2018-2025. This means that parents will need to use other tax exemptions to help make up for the loss of the child exemptions.

Out of the Nest

Since the exemption for dependents is suspended until 2025, parents have to look for other tax credits and deductions that can help them on their tax bill. Here are a couple of credits to keep an eye on.

This is just one of the many examples of how our comprehensive tax planning creates value for our clients. See other important tax planning topics on our website, here.

• Earned Income Credit
  • This credit is based on the amount of money you earn in a tax year. Designed to benefit low to medium income families with children, this credit will allow you access to a certain amount of money based on your income and the number of children you have. $7,430 is the maximum earned income credit available for the 2023 tax year for three children and parents earning no more than $63,398. For two children the maximum credit is $6,604 with an income threshold of $59,478. $3,995 is the maximum credit for one child with the parents’ income being less than $53,120. Remember, for any credit, your child must pass the qualifying child test.
• Child Tax Credit
  • The Tax Cuts and Jobs Act stipulates that parents with qualifying children are eligible to receive a $2,000 refundable credit per child. A refundable credit will allow some or all of the credit to be refunded to the taxpayer after the tax liabilities are met. The reform allows for up to $1,400 of the credit to be refunded. The $2,000 credit is an increase from the $1,000 limit in 2017 and is set to stay until 2025. Additionally, under the new tax law, many more families will qualify for this particular tax credit as the income limit has increased. Households qualify for the full amount of the Child Tax Credit for tax year 2023 for each qualifying child if you meet all eligibility factors and your annual income is not more than $200,000, or $400,000 if filing as a married couple.
  • If your child does not qualify for the tax credit, the new tax code does offer a $500 benefit per child. This is a non-refundable tax credit which means that the credit is limited to the tax liability and nothing is refunded.

The new Tax Cuts and Jobs Act has changed the way parents will claim dependents in 2018 through 2025. Therefore it is important to understand the nuances of the IRS qualifying system, exemptions that may or may not be applicable, and the other forms of tax credits available to you.

 

Related Video – Claiming College Students as Dependents

If you want personal advice on how to claim your dependents, contact us!