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dabulls4
Level 1

older dependents not taken

I have 2 dependents in ages 21 24 and not full time students in 2020.

Can I NOT take them as a dependent and let them take it for themselves.

They both have no earned income but they do have unearned income (cap gains) that I would rather be taxed at their rate vs mine? 

1 Best answer

Accepted Solutions
DMarkM1
Expert Alumni

older dependents not taken

You can include them as dependents on your return assuming they qualify and not include their income on your tax return.  They can then file their own returns and indicate that they can be claimed as dependents on someone else's return.  They would include their income on their returns.  

 

First here is reminder of the criteria to claim them as dependents.  

  1. The person can't be your qualifying child or the qualifying child of any other taxpayer.

  2. The person either (a) must be related to you in one of the ways listed under Relatives who don't have to live with you , or (b) must live with you all year as a member of your household (and your relationship must not violate local law).

  3. The person's gross income for the year must be less than $4,300.

  4. You must provide more than half of the person's total support for the year.

Second they will probably be charged a "Kiddie tax" on the unearned income.  They will get a reduced standard deduction meaning part of the unearned income will be taxed even if below the "typical" standard deduction for single taxpayers (12,400).

 

You will be able to compare overall taxes working each way (putting the income on your return vs their returns) to see which is more beneficial.  

 

 

 

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

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3 Replies
DMarkM1
Expert Alumni

older dependents not taken

You can include them as dependents on your return assuming they qualify and not include their income on your tax return.  They can then file their own returns and indicate that they can be claimed as dependents on someone else's return.  They would include their income on their returns.  

 

First here is reminder of the criteria to claim them as dependents.  

  1. The person can't be your qualifying child or the qualifying child of any other taxpayer.

  2. The person either (a) must be related to you in one of the ways listed under Relatives who don't have to live with you , or (b) must live with you all year as a member of your household (and your relationship must not violate local law).

  3. The person's gross income for the year must be less than $4,300.

  4. You must provide more than half of the person's total support for the year.

Second they will probably be charged a "Kiddie tax" on the unearned income.  They will get a reduced standard deduction meaning part of the unearned income will be taxed even if below the "typical" standard deduction for single taxpayers (12,400).

 

You will be able to compare overall taxes working each way (putting the income on your return vs their returns) to see which is more beneficial.  

 

 

 

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

Opus 17
Level 15

older dependents not taken

If a person can be claimed as a dependent on their tax return, they must answer yes to that question, even if the person who could claim them agrees not to claim them. Failing to answer yes for someone who could be claimed as a dependent by someone else, in order to get a larger stimulus payment, or avoid capital gains tax, is tax fraud.

 

Children over the age of 18 who are not full-time students can only be claimed as dependents if you provide more than 50% of their total financial support and they each have less than $4300 of taxable income this year.  However, even if their income is more than $4300, if they do not provide more than half their own support, they will still be subject to the kiddie tax.  The only way to not pay that tax is for them to say that they did provide more than half their own support.  If true, no problem. If a lie, that’s fraud.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
dabulls4
Level 1

older dependents not taken

Yes the guidance was very helpful!!

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