My daughter has some earnings. She is our dependent due to her disability despite her age. In 2024 she has some modest earnings unlike token earnings the previous years. My wife and I file our taxes jointly till now with her as a dependent and she files taxes declaring that she is claimed as a dependent by us. How do we estimate if it is better to have her continue as our dependent or not when we file our respective taxes for 2024? Thanks
If she is permanently and totally disabled then she still can be claimed as a dependent under the Qualifying Child rules. Under the rules her income is not a factor but if she provides over one-half of her own support that is a factor. If you are able to claim her as your dependent and she has income that has to be reported on tax return then she must indicate on her return that she can be claimed as a dependent.
To be a Qualifying Child -
1. The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student or (c) any age and permanently and totally disabled.
3. The child must have lived with you for more than half of the year. Temporary absences while away at college are considered living with you.
4. The child must not have provided more than half of his or her own support for the year.
5. If the child meets the rules to be a qualifying child of more than one person, you must be the person entitled to claim the child as a qualifying child.
6. The child must be a U.S. citizen or U.S., Canada or Mexico resident for some portion of the year.
7. The child must be younger than you unless disabled.
Your daughter is not declaring on her tax return that "she is claimed as a dependent." She is declaring that she can be claimed as a dependent. You cannot choose whether or not she can be claimed. If she meets the requirements that DoninGA listed, you can claim her as a dependent and she has to say on her tax return that she can be claimed, whether or not you actually do claim her.
If you can claim her, you might as well do so. It will not affect her tax return because she has to say she can be claimed, whether or not you actually claim her, and you will get a credit on your tax return for claiming her.
If she does not meet the requirements for you to claim her as a dependent, there is also no choice. You cannot claim her, and she will not indicate on her tax return that she can be claimed as a dependent.
You can use the tool at the following link on the IRS web site to determine whether or not you can claim your daughter as a dependent. It covers all the criteria that might apply.
Whom may I claim as a dependent?