$500 Credit for Other Dependents (“Family Tax Credit”)

[PSBMANLIJZM]

I was able to get a credit for $500 for my 24 unmarried daughter who lives with me the entire year and does not attend full time school. I provided more than half of her financial support. Her gross income was $2,138.87. Just to make sure, did I do this correctly?

Can she file her taxes and state she was claimed as a dependent on another person taxes?

[Hal_Al · Accepted solution]

Q. Just to make sure, did I do this correctly?

A. Yes, she qualifies as your dependent, primarily because her income was less than $4300.

There are two types of dependents, "Qualifying Children"(QC) and standard ("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. She cannot be a QC because she is too old.  

A person can still be a Qualifying relative dependent, if not a Qualifying Child, if he meets the 6 tests for claiming a dependent:

1. Closely Related OR live with the taxpayer ALL year
2. His/her gross taxable income for the year must be less than $4300 (2020).
3. The taxpayer must have provided more than 1/2 his support
4. He must be a US citizen or resident of the US, Canada or Mexico
5. He must not file a joint return with his spouse or be claiming a dependent of his own.
6. He must not be the qualifying child of another taxpayer

The Other dependent 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. A QR dependent does not qualify the taxpayer for the earned income credit.

Q. Can she file her taxes and state she was claimed as a dependent on another person taxes?

A.  Yes. But she is not required to

[PSBMANLIJZM]

Thank you for your response.

If I file my taxes and add her as a dependent, will this effect her because she received two economic impact payments (04/15/20 & 01/04/21) or will it effect her from receiving any more in the future?

Do I need to report her economic impact payments?

Turbo asked me if I received my payments.

[Hal_Al · Accepted solution]

Q.  If I file my taxes and add her as a dependent, will this effect her because she received two economic impact payments (04/15/20 & 01/04/21)

A. No.  Those two payments do not have to be paid back because a person's dependency status changed from one year to the next. You do not report her economic impact payments, when filing a 2020 return with her as a dependent. 

Q. Will it effect her from receiving any more in the future?

A . No. At least as far as the known 3rd stimulus goes. It's $1400 per person, whether the person gets it herself,  or the taxpayer who claims her gets it.  If she hasn't received it yet, whoever claims her on a 2020 return will get it.  It's not clear when they will get it, it may not be until the 2021 returns are filed.