Definition Of Qualifying Relative

KEY TAKEAWAYS

• A qualifying relative is a dependent of an individual taxpayer but does not have to be related biologically. 
• There are four conditions and criteria outlined by the Internal Revenue Service (IRS) that an individual must meet in order to be eligible as a qualifying relative. 
• The personal exemption for a qualifying relative was temporarily removed when the Tax Cuts and Jobs Act (TCJA) was introduced in 2018.

What Is a Qualifying Relative? 

The federal income tax code describes a qualifying relative as someone that’s claimed as a dependent by another taxpayer. This assumes that the individual taxpayer has provided financial support to the qualifying relative throughout the previous tax year. 

However, the personal exemption for a qualifying relative was eliminated temporarily when the Tax Cuts and Jobs Act (TCJA) of 2018 were introduced. This means that even if you claim a qualifying relative as a dependent, you won’t be able to receive an additional exemption. 

The standard deduction available under the TCJA was almost double what was previously available, which is why if you claimed a qualifying relative you aren’t eligible for additional exemptions.

How Does Claiming a Qualifying Relative Work? 

The way the Internal Revenue Service (IRS) defines a qualifying relative is incredibly straightforward. It doesn’t provide much room for misunderstanding. But as a qualifying relative, individual taxpayers can claim that person as a dependent on their tax return. 

The IRS describes a qualifying relative as someone that’s related to the taxpayer and now lives with or is taken care of in the household. However, the IRS also states that a qualifying relative doesn’t necessarily have to be biologically related to the taxpayer. 

To be a qualifying relative, the dependent’s gross income for the year cannot be more than $4,400, and the dependent must be mostly relying on the household income generated by the taxpayer. Spouses of taxpayers are not considered to be qualifying relatives. 

As well, there are four distinct tests outlined by the IRS that must be passed in order for someone to get classified as a qualifying relative. The four tests are:

• The qualifying relative of the taxpayer can’t be their qualifying child or a qualifying child of anyone else. If this criteria is not met, taxpayers are unable to claim them on their tax returns. 
• The qualifying relative could be someone related to the taxpayer, like a sibling, grandparent, child, parent, niece or nephew, aunt or uncle, some in-laws, or even some step-relatives. If not, then they must live in the household of the taxpayer for the full year. If they are relatives of the taxpayer, they do not have to live with them to be considered a qualifying relative. 
• Any potential qualifying relatives cannot earn an annual gross income of over $4,300 Yet, this amount defined by IRS increases year after year so it can be a good idea to confirm the specific amount with your tax specialist or on the IRS website. 
• The qualifying relative must receive the majority of their yearly income or financial support for the entire year directly from the taxpayer.

Qualifying Child vs Qualifying Relative 

It was mentioned above, but a qualifying relative could fall under a few different criteria. They could be a parent, grandparent, stepchild, child, sibling, niece or nephew, aunt or uncle, and more. There isn’t an age test to be considered as a qualifying relative. 

On the other hand, a qualifying child has a few other criteria to highlight. For a child to be eligible as a qualifying child, there are five requirements they must meet: 

• The relationship requirement — the qualifying child must be either:

• The child must be younger than 19 years of age by the end of the calendar year. Or, they must be younger than 24 years old if they’re a full-time student. Permanently disabled children don’t have an age limit. 
• The dependent must live in the same principal residence as the taxpayer for a minimum of half of the calendar year. This doesn’t include various temporary absences of taxpayer, such as vacation, school, or illness. 
• The child dependent cannot provide more than half of their own support throughout the year. 
• Individual taxpayers are only able to claim one dependent. In this case, having more than one taxpayer means you must decide who is going to claim the exemption. 

If an individual doesn’t meet the five requirements outlined above to be considered as a qualifying child, they may still be eligible as a qualifying relative.

Summary

A qualifying relative is someone that an individual taxpayer can claim for tax purposes. A qualifying relative can be a child, stepchild, niece or nephew, aunt or uncle, adopted child, grandparent, or sibling, for example. There isn’t a requirement for a qualifying relative to be biologically related to the taxpayer. 

There are certain tax benefits the taxpayer can receive in return for claiming a qualifying relative. These can include the child care credit, the child tax credit, the earned income credit, and the head of household credit, for example. 

The IRS outlines specific requirements that individuals must meet to be considered either a qualifying relative or a qualifying child. As long as the claimed dependent meets the outlined requirements, you can take advantage of several tax benefits.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.

Written by Jami Gong, MPAcc, CPA

Jami Gong is a Chartered Professional Account and Financial System Consultant. She holds a Masters Degree in Professional Accounting from the University of New South Wales. Her areas of expertise include accounting system and enterprise resource planning implementations, as well as accounting business process improvement and workflow design. Jami has collaborated with clients large and small in the technology, financial, and post-secondary fields.