My thoughts are with you and your family on your father-in-laws passing. There are special rules for birth and death of a dependent. You can claim a dependent who died during the year if you would have been entitled to claim their exemption if they would have survived through the end of the year.
See this explanation from IRS Publication 501. So for 2021, your father-in-law will still be considered a dependent.
On a much happier note, congrats to your son for graduating. This question would depend on his age and how much he is making at his current employer. Your son has now reached status basically as an "other dependent". which his status would be based on the following:
- Not a Qualifying Child: They are not the “qualifying child” of another taxpayer or your “qualifying child.” (due to age over 24 or fact that no longer in college if over 19 both making him no longer qualifying)
- Gross Income: The dependent being claimed earns less than $4,300 in 2020 (this amount usually increases each year.)
- Total Support: You provide more than half of the total support for the year.
- Member of Household or Relationship: The person (a friend, girlfriend, non-blood relative) must live with you all year as a member of your household or be related to you.
Therefore, if he does not fall into each of the bullet points above, then he would file his own taxes and you would not be able to claim him as a dependent.
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