Claiming dependents that receive government assistance or earned income — Is it possible?

Tax dependents are an important part of filing each tax season. Tax dependents — like children or certain relatives — can help you qualify for various tax benefits, ultimately reducing the amount of tax you owe. But what you might not realize, is how a dependent’s income could impact your ability to claim them as a dependent. So, if you have dependents in your life, it’s time to discover how they can work their magic and put more money back in your pocket this tax season.

“Who can I claim as a dependent?” Income and government assistance considerations

If you’re wondering who qualifies as a dependent and if you can claim a dependent with income, there are clear-cut rules to consider. Here’s the short answer: The Internal Revenue Service (IRS) will usually let you claim your child if they work or earn an income, no matter the dependent’s income source, if certain requirements are met.

For example, many taxpayers wonder if claiming dependents that receive government assistance is permitted by the IRS. The answer is “yes.” Even if your dependent is on Supplemental Nutrition Assistance Program (SNAP benefits) or claims Social Security Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF) including Pass-through Child Support, or other government income benefits, you can still claim them on your income tax return. What you might not know are the requisites involved in claiming a dependent with income. We’ll outline the specifics next!

“Are there income thresholds for dependents?”

If you’re questioning, “What if my dependent has income?” there are additional IRS rules to consider. While the income source doesn’t matter, there are other income considerations.

• For qualifying dependents who are not a qualifying child (called “qualifying relatives” in tax law), the person’s gross income for the 2023 tax year must be below $4,700 (for 2023).
• For qualifying relatives, they must get more than half of their financial support from you.
• For qualifying children, they can’t have provided more than half of their own financial support throughout a tax year.

Essentially, it’s not about how much income a qualifying child or qualifying relative has, but how much of their income they use for support.

Additional requirements

In addition to the above income and support tests, dependents must also meet the following requirements:

For all dependents:

• Your qualifying dependent must not use Married Filing Jointly to file their tax return, unless they’re only filing to claim a refund of income taxes withheld. Also, there would be no tax liability for either the dependent or your dependent’s spouse if filing separate returns.
• Your qualifying dependent must be a U.S. citizen or U.S. resident.

For qualifying children:

• The qualifying child must be one of these:
  • Younger than you and under age 19 or under age 24, and a full-time student
  • Permanently and totally disabled
• The qualifying child must have lived with you for more than half of the year. There are exceptions for temporary absences, like when your children are away at school.

For qualifying relatives:

• The qualifying relative can’t be anyone else’s qualifying child
• The qualifying relative must be related to you as a:
  • Child, stepchild, or foster child
  • Sibling, half-sibling, or step-sibling
  • Parent or grandparent
  • Step-parent
  • Child of your sibling or half-sibling
  • Sibling of your parents
  • In-law such as daughter or son-in-law, father or mother-in-law, as well as a brother or sister-in-law
  • Or the person must live with you the entire year as a member of your household.

“Should my dependent file their own taxes, even if I claim them?”

If your child earns income but you claim them as a dependent, they may or may not be required to file a federal income tax return. However, even if they don’t have a filing requirement but their employer withholds taxes from their paycheck, they may be eligible for a tax refund. To get their refund, they should file an income tax return.

“What about tax benefits like the Child Tax Credit?”

If your dependent has earned income, can you still claim the Child Tax Credit? The answer is “yes,” but your child must first meet all of the eligibility requirements to be claimed as your qualifying child this tax year. (We referenced them earlier in this post!) In addition, they must be under 17 and have a Social Security number. If they meet these requirements, their work status or income likely won’t affect their eligibility to be claimed as a qualifying child.

Navigating dependent income taxes

While there are many nuances to tax dependents, you can still claim them even if they earn income or receive SNAP benefits or other government assistance. Yet, there are many things to keep top of mind when claiming dependent taxes, so let us help!

Whether you choose to file with a tax pro or file with H&R Block Online, you can rest assured that we’ll get you the biggest refund possible.