For federal tax purposes, there are two types of tax dependents. A qualifying child is the most widely recognized type. The other dependent type, a qualifying relative, includes more than just immediate family members. In some situations, an unrelated household member may be eligible to be claimed as a qualifying relative.
The tax advantage of a qualifying relative is considerably less than that of a qualifying child. None of the income tax credits are applicable to a qualifying relative. The only advantage to claiming a qualifying relative is that your taxable income is reduced by the amount of the exemption for the dependent.
For extended family members to be claimed as a dependent, they must have received over half of their support for the year from you. Also, their income for the year must have been under $3,950. Extended family members possibly eligible to be claimed as a qualifying relative include the following:
- Parent or grandparent
- Stepmother or stepfather
- Aunt or uncle
- An in-law
Dependents who are typically qualifying children may sometimes be qualifying relatives if they fail to meet all the requirements of a qualifying child. The IRS definition of a qualifying child is somewhat imprecise because it also includes siblings and their descendants.
A related family member who is a qualifying relative does not have to live with you to be claimed. For tax purposes, a cousin is not considered a family member. However, a cousin may possibly be claimed in the same manner as an unrelated household member.
Unrelated household member
The IRS definition of a qualifying relative is also a bit imprecise. An unrelated person who lives with you for the entire year may be claimed as a qualifying relative if the following conditions are also met:
- You provide over half the person's support
- The individual earned less than $3,950
When children become too old to be claimed as a qualifying child, they sometimes become eligible to be claimed as a qualifying relative. However, their earnings must be under $3,950, and they must receive the majority of their support from you. As a related family member, they are not required to reside with you to be a qualifying relative.
A qualifying relative does make a tax filer eligible to file as head of household. Even so, the additional dependent included on your tax return helps offset the cost of their support. Contact a certified public accountant for more information about tax issues concerning families.