Yes, usually the child must be on your federal return to claim the state exemption. States do have some exceptions and you would have to check the state instructions for your state. Here is an AZ example.
The following individuals may qualify as dependents or "Other Exemptions" on your Arizona return but not on your federal return:
- An individual you could have claimed on your federal return but didn't in order to allow the individual to claim his or her own federal education credit. The individual must qualify as a federal dependent even though you didn't include them on your federal return. For more information on this situation, see Arizona Individual Tax Ruling 05-2 . These individuals will be listed with the rest of your dependents on your Arizona return.
- An individual 65 years of age or older (as of January 1, 2020) who doesn't qualify on your federal return as a dependent. You must have paid more than one-fourth the cost for a nursing or assisted care facility (costs must exceed $800), or you paid more than $800 for either home health care or other medical costs for the person. These individuals will be listed as "Other Exemptions" on your Arizona return.
- A stillborn child qualifies if the stillbirth occurred in 2019, you received a certificate of birth resulting in stillbirth from the Arizona Department of Health Services, and the child would have otherwise been a member of your household. These individuals will be listed as "Other Exemptions" on your Arizona return.
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