729 / What conditions must be met to entitle the taxpayer to a dependency exemption?

Qualified disability trusts will continue to be permitted a personal exemption amount equal to the “deemed personal exemption amount,” which is $5,100 in 2025, $5,000 in 2024, $4,700 in 2023, $4,400 in 2022, $4,300 in 2020-2021, $4,200 in 2019 and $4,150 in 2018 (as indexed for inflation).¹ The same amounts apply for all other relevant IRC provisions.

Prior to 2018, a taxpayer was entitled to claim the dependency exemption for each dependent with respect to whom the following tests were met.² The term “dependent” means a “qualifying child” (see below) or a “qualifying relative” (see below).³

Dependents were not entitled to claim a personal exemption for themselves in addition to the exemption claimed by the taxpayer who supports them.⁴ The dependent, if married, could not file a joint return with his or her spouse.⁵ In addition, the term “dependent” did not include an individual who is not a citizen or resident of the United States (or a resident of Canada or Mexico). However, a legally adopted child who did not satisfy the residency or citizenship requirements may nevertheless have qualified as a dependent if certain requirements are met.⁶

The taxpayer could claim the exemption even though the dependent files a return. The taxpayer was required to include the Social Security number of any dependent claimed on his return.⁷

Qualifying child. The term “qualifying child” means an individual who:

(1) is the taxpayer’s “child” (see below) or a descendant of such a child, or the taxpayer’s brother, sister, half-brother, half-sister, stepbrother, stepsister or a descendant of any such relative;

(2) has the same principal place of abode as the taxpayer for more than one-half of the taxable year;

(3) is younger than the taxpayer claiming the exemption and (i) has not attained the age of nineteen as of the close of the calendar year in which the taxable year begins, or (ii) is a student who has not attained the age of 24 as of the close of the calendar year;

(4) has not provided over one-half of the individual’s own support for the calendar year in which the taxpayer’s taxable year begins; and

(5)  has not filed a joint tax return (other than for a refund) for the taxable year.⁸

The term “child” means an individual who is: (1) a son, daughter, stepson, or stepdaughter of the taxpayer; or (2) an “eligible foster child” of the taxpayer.⁹ An “eligible foster child” means an individual who is placed with the taxpayer by an authorized placement agency or by judgment decree, or other order of any court of competent jurisdiction.¹⁰ Any adopted children of the taxpayer are treated the same as natural born children.¹¹

Qualifying relative. The term “qualifying relative” means an individual:

(1)who is the taxpayer’s:

(i) child or a descendant of a child,

(ii)brother, sister, stepbrother, or stepsister,

(iii) father or mother or an ancestor of either, or stepfather or stepmother,

(iv) son or daughter of a brother or sister of the taxpayer,

(v)brother or sister of the father or mother of the taxpayer,

(vi)
son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or

(vii)
an individual (other than a spouse) who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer’s household;

(2)whose gross income for the calendar year in which the taxable year begins is less than the exemption amount (see editor’s note, above);

(3)for whom the taxpayer provides over one-half of the individual’s support for the calendar year in which the taxable year begins; and

(4)who is not a qualifying child of the taxpayer or of any other taxpayer for any taxable year beginning in the calendar year in which the taxable year begins.

The Service has provided guidance for determining whether an individual is a qualifying relative for whom the taxpayer could claim a dependency exemption deduction under IRC Section 151(c). The guidance clarifies that an individual is not a qualifying child of “any other taxpayer” if the individual’s parent (or other person with respect to whom the individual is defined as a qualifying child) is not required (by IRC Section 6012) to file an income tax return and either (1) does not file an income tax return, or (2) files an income tax return solely to obtain a refund of withheld income taxes.¹²

Prior to 2018, the amount of the personal exemption was adjusted annually for inflation.¹³ The exemption was subject to phaseout for certain high-income taxpayers (but not in 2010-2012). For details, see Q 728.

Life insurance premiums on a child’s life are not included in determining the cost of the child’s support.¹⁴

The Tax Court held that a dependent’s self-employment loss did not reduce her earned income for purposes of determining her standard deduction under IRC Section 63(c)(5)(B).¹⁵