Get Tax Credits for Adult Dependents

5. Member of household or relationship test

There are two ways to satisfy this requirement. The adult you’re supporting can either (a) live with you for the entire tax year (or until their death) as a member of your household, or (b) be related to you in one of the following ways:

• Your child, stepchild, foster child, or a descendant of any of them (e.g., your grandchild)
• Your brother, sister, half brother, half sister, stepbrother or stepsister
• Your father, mother, grandparent or other direct ancestor (but not your foster parent)
• Your stepfather or stepmother
• Your niece or nephew (including a son or daughter of your half brother or half sister)
• Your aunt or uncle
• Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law

If you’re married and file a joint tax return, the person you’re supporting can be related to either you or your spouse in one of the ways mentioned. Note, however, that your spouse can’t be your qualifying relative.

A person is still considered to be living with you as a member of your household during any period when either of you is temporarily absent due to special circumstances, such as:

• Illness
• Attending college
• Business trips
• Vacations
• Military service
• Nursing home placement (even if for an indefinite period)

6. Gross income test

This test if often the hardest to pass. To satisfy this requirement for the 2023 tax year, the gross income of the person you’re supporting must be less than $4,700 ($5,050 for 2024).

All income that isn’t exempt from tax is included in a person’s gross income. This includes all taxable Social Security benefits and unemployment compensation. However, if a person is permanently and totally disabled, certain income for services performed at a sheltered workshop might not count as gross income.

7. Support test

To pass the final test for a person you’re supporting, you must generally provide more than 50 percent of the person’s total support during the tax year. For this purpose, total support includes all money spent to provide food, housing, clothing, medical and dental care, education, transportation, recreation and similar necessities for the person you’re supporting.

Special rules apply if two or more people helped support a single person but no one in the group provided over half of that person’s total support for the year. In that case, the people providing support can agree that one person from the group can claim the supported person as a dependent. However, the person selected must have supplied more than 10 percent of the person’s total support. The other people who provided support must also sign a statement agreeing not to claim the supported person as a dependent for that tax year.

If you can claim an adult as a dependent, you might be able to claim certain tax credits and deductions, or use a more favorable filing status, which can reduce your overall tax liability. (A deduction reduces your taxable income, which reduces your tax bill; a credit reduces your tax bill, dollar for dollar.)

Let’s look at some of the tax benefits that are available if you satisfy all seven of the tests for having a qualifying relative.

Credit for other dependents

Most people have heard of the child tax credit, which is generally available to people with dependents who are qualifying children (assuming the child is 16 or younger and has a Social Security number). However, the child tax credit is not available for dependents who are qualifying relatives.

Instead, the credit for other dependents can be claimed for each qualifying relative. The credit is worth up to $500 for each qualifying dependent. However, it’s gradually phased out (potentially to zero) for joint filers with a modified adjusted gross income (AGI) over $400,000 and other taxpayers with a modified AGI greater than $200,000. (Modified AGI is your AGI from Line 11 of your Form 1040, plus certain exclusions and deductions for people living outside the U.S. and residents of American Samoa or Puerto Rico.)

Child and dependent care credit

This is another tax credit primarily associated with the cost of child care for younger children. However, it can also be claimed for expenses related to the care of adult dependents who aren’t able to care for themselves and have lived with you for more than half of the tax year. The dependent care expenses must also be work-related (i.e., paid to enable you, or your spouse if you’re filing a joint return, to work or look for work).

The credit is equal to a percentage of the first $3,000 of qualifying work-related expenses for one dependent, or the first $6,000 of expenses if you’re paying for the care of two or more dependents. The percentages range from 20 percent to 35 percent, depending on your AGI (the lower your income, the higher the percentage). As a result, the maximum credit is $1,050 for one dependent, or $2,100 for more than one dependent.

Education credits

Both the American Opportunity credit and the Lifetime Learning credit are available for tuition and other education expenses you paid for a dependent. So, if your support of an adult dependent includes paying some of their education costs, you might be able to claim a tax credit for those expenses.

The American Opportunity tax credit, which is generally available the first four years of college, can be as high as $2,500 per eligible student per year. While the Lifetime Learning credit is only worth up to $2,000 per eligible student per year, it’s not restricted to expenses for the first four years of college. Both credits are gradually phased out if your modified AGI is between $80,000 and $90,000 ($160,000 to $180,000 for married couples filing a joint return).

Student loan interest deduction

If you take out a loan to pay an adult dependent’s college or vocational school expenses, you might be able to deduct the interest payments on the loan. You might still qualify for the deduction if the person you’re supporting doesn’t qualify as your dependent because he or she failed the gross income test (i.e., had gross income of $4,700 or more in 2023, or $5,050 or more in 2024).

The deduction is worth up to $2,500 per year. However, for the 2023 tax year, the $2,500 maximum phased out for joint filers with a modified AGI between $155,000 and $185,000, and for other taxpayers with a modified AGI between $75,000 and $90,000. (The phase-out ranges are $165,000 to $195,000 and $80,000 to $95,000, respectively, for the 2024 tax year.)

Medical and dental expense deduction

If you itemize, you might be able to deduct an adult dependent’s unreimbursed medical expenses. The deduction is also available if an adult you support would have been your dependent except that he or she failed the gross income test or filed a joint tax return, or if you (or your spouse if filing jointly) could be claimed as a dependent on someone else’s return.

The definition of a “medical expense” for purposes of the deduction is quite broad. It not only includes dental expenses, but the costs to diagnose, cure, mitigate, treat or prevent an illness or disease are included as well. So are the costs of related equipment, supplies and diagnostic devices. Even health insurance premiums, transportation costs to get medical care, payments for qualified long-term care services and limited amounts paid for qualified long-term care insurance can count, too.

However, there is a catch: You can only deduct medical expenses that exceed 7.5 percent of your AGI. So, for example, if your AGI is $50,000 and you have $6,000 in qualified medical expenses, you can only deduct $2,250 of those medical costs ($6,000 – ($50,000 x 0.075) = $2,250). The standard deduction is $14,600 for single filers for the 2024 tax year, up from $13,850 for 2023. The standard deduction for couples filing jointly is $29,200 in 2024, up from $27,700 in the 2023 tax year.

Head-of-household filing status

If you’re not married, your tax bill might be lower if you can claim the head-of-household filing status instead of filing as a single person. 

One of the requirements for filing a tax return as a head of household is having either a qualifying child or qualifying relative live with you in your home for more than half the tax year (although a qualifying relative who’s a dependent parent doesn’t have to live with you). So, if you have an adult dependent, you might qualify for the head-of-household filing status.

How can filing as a head of household cut your tax bill? Most notably, your standard deduction will be higher than if you file as a single taxpayer. The standard deduction for single filers is $14,600 for the 2024 tax year, up from $13,850 for 2023. However, it’s $21,900 for head-of-household filers in 2024, up from $20,800 for the 2023 tax year.​You might end up in a lower tax bracket, too. In addition, you also might pay tax on capital gains at a lower rate or qualify for a tax break (such as the Saver’s Credit) by filing as a head of household instead of as a single person.

While there are definite tax benefits for a person who can claim an adult family member as a dependent, it might not be so good from a tax perspective for the dependent adult.

For one thing, a dependent’s standard deduction is limited. For the 2023 tax year, a dependent’s standard deduction is generally limited to the greater of:

• $1,250
• Earned income for the tax year, plus $400 (but not more than the regular standard deduction amount)

For 2024, it’s capped at the higher of:

• $1,300
• Earned income for the tax year, plus $450 (again, not more than the regular standard deduction amount)

Dependents also aren’t eligible for certain tax deductions and credits, including the:

• Earned income credit
• Student loan interest deduction
• American Opportunity credit
• Lifetime Learning credit
• Retirement savings contributions credit (Saver’s Credit)
• Previously owned clean vehicle credit
• Health insurance premium credit
• First-time homebuyer credit
• Heath savings account deduction

So consider any potential impact on the dependent’s tax liability before claiming an adult family member as a dependent on your tax return. You can get more information from the IRS.