Who are dependent children?
Children can be claimed as dependents provided that they meet one of the following categories:
- Under age 19 at the end of the year
- Under age 24 at the end of the year and a full-time student
- Permanently disabled at any age
To claim an exemption for a dependent child, the taxpayer must provide at least 50% of the child’s support and the child must live with the adult at least half of the year. Parents, step-parents, foster parents, siblings and grandparents may claim children as dependents.
When a dependent child must file
A person who is a dependent may still have to file a return. This depends on the amount of the dependent’s earned income, unearned income, and gross income. There are four basic tests, any one of which requires a federal income tax return to be filed for a given year:
- The child has unearned income (from investment interest, gains, and so on) above $950.
- The child has earned income above $5,800.
- Gross income is greater than the larger of $950 or earned income (up to $5,800) plus $300.
- Net earnings from self-employment are $400 or more.
Additional rules apply for a dependent who is blind, who owes Social Security and Medicare taxes on tips or wages not reported to or withheld by the employer, or those who receive wages from churches exempt from employer Social Security and Medicare taxes.
When a dependent child should file a return
When children take jobs that pay taxable wages, some employers may automatically withhold part of pay for income taxes. By filing Form W-4 in advance of withholding, children who do not expect to owe any income tax can request that employers not withhold. But if the employer has already withheld taxes, the child should file a return to get the taxes back from the IRS.
Dependent child’s income
Earned income. This is salaries, wages, professional fees, and other amounts received as pay for work you actually perform. Earned income also includes any part of a scholarship that you must include in your gross income.
Unearned income. This is income such as interest, dividends, and capital gains. Trust distributions of interest, dividends, capital gains, and survivor annuities are considered unearned income also.
Standard deduction for dependent children
Dependent children have a choice between claiming itemized deductions or the standard deduction. Children usually have a small amount of itemized deductions or none at all, so in most cases they claim the standard deduction.
The standard deduction for a dependent child depends on how much earned income the child has. This amount is the greater of the following two amounts:
- the minimum standard deduction ($950 for 2011), or
- The child’s earned income plus a base amount ($300 for 2011), but not more than the regular standard deduction for a single person ($5,700 for 2009).
Your dependent child’s standard deduction is $950 if all the child’s income is unearned income. When your child begins to have earned income, the first $650 will not cause any increase in the standard deduction — but after that, each additional dollar earned will increase the standard deduction by a dollar until the standard deduction reaches the amount that would be allowed if your child were not a dependent.
Personal exemption for dependent children
A dependent child can’t claim a personal exemption if someone else is entitled to claim the exemption. That’s true even if the other person does not actually claim the exemption. The mere fact that someone else qualifies for the exemption is enough to disqualify the child from claiming it. You can’t give a personal exemption to your dependent child by not claiming it.
