Tax Dependents

Dependents on Your Tax Return - 2/13/09

Kim: Last week we mentioned that you could e-mail in your legal and tax questions for attorney Michael Solomon. Since we are in the middle of tax season the questions are about taxes. The first question a viewer asked was whether parents can claim their 21 year old child, who is part-time student with a full-time job, as a dependent on their tax return?

Mike: Good question. This impacts lots of people. Let me go over the basic rules. If someone qualifies as a dependent, you can deduct $3500 off your income , which could save you close to $700 dollars in taxes.

To qualify as a dependent there are several complicated rules. The one most people deal with is whether you can claim an adult child as a dependent.

Here are the basic rules:

1. Relationship. The dependent can be either your natural child , adopted child , foster child or any grandchild . It can also be in certain situations a niece or nephew.

2. Age. The child must be under age 19 at the end of 2008 or a full-time student and under age 24 at the end of 2008.

A full-time student can be either in secondary school or college. Full-time means full- time for at least 5 months out of the year. Schools that only offer internet courses do not count.

3. Residency. The child must live with you for more than ½ the year. Being away at school goes towards satisfying the ½ year requirement.

4. Support. The child cannot have provided more than ½ of his support. Scholarships received by your child who is a full-time student are not taken into account against you satisfying the test.

Unfortunately for the viewer, it appears that her child does not qualify for several reasons. The child was not a full-time student and it sounds like the child provided more than ½ of her own support.

Like all tax rules, there are all sorts of exceptions and complications. Try IRS Publication 501 which explains these rules. You can get the publication off the IRS website.

Kim: Mike, another viewer purchased their first home out of foreclosure in January of 2008 and wondered if there were any special tax breaks.

Mike: Unfortunately for them, their timing was three months off, and it will cost them up to $7500. Last summer, Congress passed a new law that gave certain first time home buyers a tax credit of up to $7500 dollars for homes purchased from April 9, 2008 through June 30, 2009. The $7500 dollars had to be repaid over 15 years. The new tax law that just passed Congress will broaden this law a little bit. It increased the credit to $8,000 and waives the repayment obligations for homes purchased on or after January 1, 2009 through the end of November.

Kim: Too bad for this viewer. It doesn't seem fair that three months could cost them so much. I guess no one ever said the tax laws are fair. Thanks again. I want to remind everyone that if you have any questions for Mike Solomon, please e-mail them to