Is an adult handicapped child eligible for a dependent?

[NCperson]

best to run your scenario through the IRS dependent tool as there is a lot of detail missing to give you an adequate response: 

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

[Hal_Al]

Q.  Is an adult handicapped child eligible for a dependent?

A. Simple answer: yes.  The child must live with you and not provide  more than half of his own support.

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, student status or disability status, a relationship test and residence test.

A child (and some other close relations) of a taxpayer can still be a “Qualifying Child” (QC) dependent, regardless of his/her income, if:

1. He is under age 19, or under 24 if a full time student for at least 5 months of the year, or is totally & permanently disabled
2. He did not provide more than 1/2 his own support. Scholarships are excluded from the support calculation
3. He lived with the parent (including temporary absences such as away at school) for more than half the year

So, it doesn't matter how much he earned. What matters is how much he spent on support. Money he put into savings does not count as support he spent on himself.

The support value of the home, provided by the parent, is the fair market rental value of the home plus utilities & other expenses divided by the number of occupants.

The IRS has a worksheet that can be used to help with the support calculation. See: http://apps.irs.gov/app/vita/content/globalmedia/teacher/worksheet_for_determining_support_4012.pdf

Note that the support test is different for each type of dependent. The support test, for a QC, is only that the child didn't provide more than half his own support. The support test for a Qualifying Relative is that the taxpayer provided more than half the relative's support.

[Opus 17]

There are two sets of rules.

For a "qualifying child" dependent (that's the name of the rule, even if they are not a child), the person must be permanently disabled, live in your home more than half the year, and not provide more than half their own support.

• For the  disabled test, disabled means unable to perform gainful work, due to a condition that is permanent, or will last at least one year, or will lead to death.  Gainful work is employment for money.  Someone who can work a part-time job at the usual wage is generally considered to be able to perform gainful work, even if they need accommodations.  And many people with medical disabilities are still able to work, so they don't qualify.  For the dependent test, disabled means unable to work.
• For the support test, you don't have to provide more than half, just the person provides less than half.  Disability payments in the person's name don't count as support they provide themselves, but earned income, or money they spend from their savings or investments, does count as support they provide to themself.  They need to provide less than half their total support. 

The other type of dependent is "qualifying relative."  For qualifying relative dependent who is your child, you only have to show that you pay more than half their support, and they have less than $4700 (for 2023) of taxable income ($5050 for 2024).  They don't have to live at home or be disabled.

The only real tax difference between the two dependent categories that I know of, is that if you pay for day care to care for your disabled child while you work, you can claim the child care credit if the dependent is a qualifying child but not a qualifying relative. [Added: A qualifying child dependent also makes you eligible for the Earned Income Credit if you otherwise qualify, but not a qualifying relative dependent.]

In Turbotax, there will be questions about the person's age, residency, support and disability that should lead to the right answer for your situation. 

[NCperson]

@Opus 17 - the other benefit is that earned income tax credit is based on "qualified children" as one of the determinants of the credit, so if you are claiming a disabled adult and they meet the test of a "qualified child", they would count for one of the up to three dependents permitted under this credit.   

[NCperson]

@Opus 17 sorry - one more comment: 

On the dependent care credit, being "disabled" doesn't qualify for the credit.  The dependent has to be "incapable of self-care" to be eligible for the credit.  So a disabled Qualifying Child has to be  incapable of self-care to be eligible for the credit; disabled, but capable of self-care is not tax credit eligible.