College Graduate: Are you still a dependent?

Ed note: Over and over again, we hear from clients who are confused about dependency. This is particularly true for recent graduates who may be wondering whether they should claim a personal exemption or whether their parents can still file with them as a dependent. Here’s some help to clear that up. Leer en español.

So you’ve just graduated from college and you’re finally out in the real world, free from the restrictive grasp of your parents. But are you really? According to the IRS, maybe not, because your parents may still be able to claim you as a dependent on their tax return.

When it comes to dependents, we typically think of minor children living in their parents’ home. However, the rules for claiming dependents can apply to adult children who are no longer in school.

For recent college graduates (i.e., those over age 19 and no longer considered to be full-time students), their parents may be able to claim them as dependents under the rules for qualifying relatives. Generally, parents can claim their adult son or daughter as a dependent if the following are true:

• The child’s gross income is less than the personal exemption amount for the year ($3,950 for 2014; $4,000 for 2015).
• The parent provides more than one-half of the child’s support for the year.
• The child is not considered to be the “qualifying child” under the dependency rules of any other taxpayer for the year.

Note that there is no requirement that the son or daughter actually reside with the parent for the parent to claim them as a dependent.

So basically, if you make less than the above amount in a year and your parents are footing more than half of your bills, they are likely entitled to claim you as a dependent. When you cross that income threshold or start providing the majority of your support, you are free from your parents’ tax clutches.

It is important to note that if your parent can claim you as a dependent, you cannot claim your own personal exemption on your tax return. This is true even if your parents don’t file their return with you listed as their dependent, or don’t file their own return(s) at all.

Not sure if this applies to you? Luckily the IRS provides an easy way for individuals to determine whether they can claim their own exemption on their website. See: Can I Claim My Personal and/or Spousal Exemption?