Q. Can I claim my father and sister even though they live in another country?
A. Yes, since they are US citizens.
There are two types of dependents, "Qualifying Children"(QC) and Other ("Qualifying Relative" in IRS parlance even though they don't have to actually be related). There is no income limit for a QC but there is an age limit and student status test, a relationship test and a residence test. Only a QC qualifies a taxpayer for the Earned Income Credit and the Child Tax Credit. The Other dependent (qualifying relative) credit is worth (up to) $500 per dependent and is non-refundable. That is, it can only be used to reduce an actual tax liability. Your sister cannot be a QC, since she doesn't live with you.
A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:
- Closely Related OR live with the taxpayer ALL year
- His/her gross taxable income for the year must be less than $4300 (2021).
- The taxpayer must have provided more than 1/2 his support
- He must be a US citizen or resident of the US, Canada or Mexico
- He must not file a joint return with his spouse or be claiming a dependent of his own
- He must not be the qualifying child of another taxpayer
He must have a US social security number or tax identification number (TIN)
Nontaxable Social security doesn't count as income, for the income test, but social security money he/she spends on her self does count as support not provided by you, for the support test. Money he puts into savings & investment does not count as support he spent on himself. Note that a parent and sister are closely related so there is no requirement that they live with you at any time, during the year.
Q. Does that mean my filing status should be Head of Household?
A. Yes, under a special rule for parents. To claim head-of-household status, you must be legally single, pay more than half of household expenses and have either a qualified dependent living with you for at least half the year or a parent for whom you pay more than half their living arrangements (even if the parent didn't live with you).
