Perhaps you once imagined your empty-nest years with the same sort of bittersweet emotion you experienced on the first day of kindergarten: a sense of pride as you watch your children walk away, competing with a weepy desire to give them just one more hug before they go. But if you're like many parents of 20-something children who are back at home (or never left), you might also be starting to wonder if those empty-nest years are ever going to materialize at all.
With more and more adult children returning home after college (or living at home while they attend college or enter a tough job market right out of high school), many parents are faced with supporting one or more of their grown offspring well past their 18th birthdays. According to an April 2011 Rutgers University study, about 48 percent of college students who graduated between 2006 and 2010 still rely on their parents for some level of financial support, and recent projections by consulting firm Twentysomething, Inc. indicate that as many as 85 percent of 2011 college graduates will be moving home after commencement.
The U.S. Department of Agriculture estimates that middle class families will spend $222,360 to raise a child born in 2009 to the age of 17. (The USDA has provided these estimates since 1960 to help set child support and foster care reimbursement guidelines; and you thought they only graded meat!) Of course, this number excludes any college costs (even savings set aside for college during the first 17 years), and as any parent who has raised a child beyond age 17 will tell you, it's the next five years or so that are really the kickers.
So you're still buying your adult children's groceries, helping with their cell phone bills and car insurance, and providing a roof over their heads. (Please tell us you're not still doing their laundry!) But when tax time rolls around, can you claim that adult child as your dependent? In a word: Sometimes. Read on to find out when.
The Case of the Qualifying Child
The good news is that in many cases you can, in fact, claim your adult child as a dependent. To help you figure out just when this is allowed, the IRS has created a set of fairly simple tests. That's "simple" by IRS standards, so bear with us here.
First, that grown person using all your hot water and forgetting to put the milk back in the fridge (no, not your husband -- the other one) must meet the qualifying child or qualifying relative test. To be a qualifying child, he or she must meet all of the following criteria:
- The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister or a descendant of any of those.
- The child must be younger than you, or younger than your spouse, if filing jointly. (Kind of a no-brainer for your own kids, but comes into play for the sibling/stepchild scenarios.)
- The child must be under age 19 at the end of the tax year, or under age 24 at the end of the tax year if a full-time student. (If your unemployed 28-year old still calls your basement "home," don't despair: There's a test for you on the next page.)
- The child must have lived with you for more than half the year.
- The child must have provided less than half of his or her own support for the year.
- The child must not have filed a joint return with someone, except to claim a refund.
If your child satisfies the qualifying child requirements, you're almost there: Just a few more criteria to meet. If not, there's still hope. Read on to see if your little couch potatoes meet the qualifying relative test.
The Case of the Qualifying Relative
Here's where things get a little more confusing. In the eyes of the IRS, your child can be a qualifying relative even if he or she is not a qualifying child. However, your child cannot be both a qualifying child (to you or anyone else) and a qualifying relative.
You can claim your adult child as a qualifying relative only if the child meets all of the following conditions:
- The adult child must be your child, stepchild, foster child or a descendant of any of those.
- Or he or she can be your brother, sister, half brother, half sister, stepbrother or stepsister; your niece or nephew; or your son-in-law or daughter-in-law.
- The child must have a gross income of less than $3,650 for the year.
- You must have provided more than half the person's total support for the tax year.
Note that an adult child meeting the relationship criteria above does not necessarily need to live in your home to qualify as your dependent: If you provide more than half his or her total support for the year, and he or she earns less than $3,650, you may still be able to claim them.
If, despite your wallet's proven tendency to leak $20 bills whenever your grown child is within a 3-mile radius, your situation does not satisfy the tests for either qualifying child or qualifying relative, you will not be able to claim your child as a dependent on your tax return. However, you may still be able to deduct the cost of health insurance premiums for adult children up to age 27, even if those children do not qualify as dependents. Check with your tax preparer or the IRS Web site for details.
If your child does meet one test or the other, read on to see if you pass the three remaining tests required to claim your child as a dependent.
The Moment of Truth
Now that you've established that your child is either a qualifying child or a qualifying relative, the remaining three tests are actually pretty easy:
- The dependent taxpayer test: If you (or your spouse, if filing jointly) could be claimed as a dependent by any other person, you cannot claim anyone else as a dependent -- even your qualifying relatives or qualifying children. (Of course, the good news is that if someone else can claim you as a dependent, you can do to them what your adult children are doing to you. Be considerate and pick up your wet towels off the floor, won't you?)
- The joint return test: If your child files a joint return with someone else, you may not claim your child as a dependent, unless the joint return is filed only to claim a refund.
- The citizen or resident test: You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. (There are exceptions for certain adopted children.)
So provided that your child is a qualifying child or qualifying relative, you and your spouse are not the dependents of anyone else, your adult child is not filing a joint return, and your child meets the citizenship requirements listed above, the answer is yes, you can claim your adult child as a dependent on your tax return.
- Brackey, Harriet Johnson. "Tax Q&A: Can I claim my adult son as a dependent?" Sun Sentinel. Feb. 3, 2010. (May 16, 2011)http://articles.sun-sentinel.com/2010-02-03/business/fl-tax-qa-020310-20100202_1_tax-q-a-claim-health-care
- Godofsky, Jessica. "Unfulfilled Expectations: Recent College Graduates Struggle in a Troubled Economy." Rutgers University. May 2011. (May 22, 2011) http://www.heldrich.rutgers.edu/sites/default/files/content/Work_Trends_May_2011.pdf
- Internal Revenue Service. "Important Tax Law Changes for 2010." Feb. 14, 2011. (May 16, 2011)http://www.irs.gov/newsroom/article/0,,id=120227,00.html
- Internal Revenue Service Publication 501. "Exemptions for Dependents." (May 16, 2011)http://www.irs.gov/publications/p501/ar02.html#en_US_2010_publink1000220868
- Internal Revenue Service Publication 501. "Qualifying Child." (May 16, 2011)http://www.irs.gov/publications/p501/ar02.html#en_US_2010_publink1000220886
- Saenz, George. "Claiming an Adult Dependent." Bankrate.com. March 4, 2004. (May 14, 2011)http://www.bankrate.com/brm/itax/tax_adviser/20040304a1.asp
- Shellenbarger, Sue. "Cost of Raising a Child Ticks Up." The Wall Street Journal. June 10, 2010. (May 21, 2011) http://blogs.wsj.com/juggle/2010/06/10/cost-of-raising-a-child-ticks-up/
- Twentysomething, Inc. "In the News." (May 13, 2011) http://www.twentysomething.com/inthenews.html
- U.S. Department of Agriculture. " Expenditures on Children by Families, 2009." (May 22, 2011) http://www.cnpp.usda.gov/Publications/CRC/crc2009.pdf