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Claiming a child as a dependent on your tax return can provide significant tax benefits, such as access to valuable credits and deductions. However, as children grow older and begin earning money from part-time jobs, summer gigs, or investments, many parents wonder how much income a child can earn before they can no longer be claimed as a dependent.

The rules surrounding dependents and income thresholds can seem complicated, but they are crucial to understand to avoid making errors on your tax return and potentially missing out on tax savings. In this article, we’ll break down how much money a child can earn and still be claimed as a dependent, exploring the IRS guidelines, income thresholds, and other factors that determine eligibility.

1. Understanding the IRS Rules for Dependents

The IRS sets specific criteria for determining who qualifies as a dependent. These rules are important because they affect whether parents or guardians can claim certain tax credits, file with a more favorable status, and take advantage of other deductions.

A child must meet certain qualifications in terms of relationship, age, residency, support, and income for their parents or guardians to claim them as a dependent. Here’s an overview of these basic requirements:

Relationship Test

The child must be your biological child, stepchild, foster child, adopted child, or a descendant of any of them (such as a grandchild). Siblings, step-siblings, and nieces or nephews can also be considered dependents under certain circumstances.

Age Test

• The child must be under 19 years old at the end of the tax year, or under 24 years old if they are a full-time student. This age limit is extended if the child is still in school.
• If the child is permanently disabled, there is no age limit.

Residency Test

The child must have lived with you for more than half of the year. Temporary absences for education, illness, or vacation are generally considered as time spent living with the parent or guardian.

Support Test

This is one of the most important tests to determine whether a parent can claim their child as a dependent. The child must not provide more than half of their own financial support during the year. The parent must provide the majority of financial support, which includes paying for things like food, shelter, clothing, education, medical care, and other essential living expenses.

Filing Status Test

The child cannot file a joint tax return for the year unless they are filing only to claim a refund of taxes withheld and are not claiming themselves as independent filers.

Once these basic requirements are met, the next question becomes: how much money can a child earn while still being claimed as a dependent?

2. How Much Income Can a Child Earn and Still Be Claimed as a Dependent?

There are two main types of income the IRS considers when determining a child’s dependent status: earned income and unearned income. Each type of income has different rules and thresholds that impact whether the child can still be claimed as a dependent.

Earned Income: No Set Limit, But Watch the Support Test

Earned income is money that a child earns through work, such as wages from a part-time job, summer work, or even self-employment from gigs like babysitting, lawn mowing, or tutoring. One of the key aspects of earned income is that there is no strict limit on how much a child can make through working as long as the child is not paying for more than half of their own living expenses.

This means that if your child earns $15,000 from a job, they could still be claimed as a dependent on your tax return as long as you, the parent, are providing more than 50% of their financial support, including housing, food, education, and other necessary expenses.

For example:

• Your child earns $8,000 from a part-time job, but they live at home and you cover all of their basic living expenses (rent, groceries, medical bills, etc.).
• Because you are still providing more than half of their financial support, they can still be claimed as a dependent.

However, if the child is using their income to cover their living expenses—such as rent, groceries, and utilities—and you are not providing more than half of their support, they may no longer qualify as a dependent.

Unearned Income: Limitations on Investment Income

Unearned income refers to income from sources other than work, such as interest, dividends, capital gains, and other investment income. The IRS does place limits on how much unearned income a child can have while still being claimed as a dependent.

For the 2024 tax year, the threshold for unearned income is $2,500. If a child has more than $2,500 in unearned income, they may be subject to the “kiddie tax,” which means that the child’s investment income will be taxed at their parents’ tax rate instead of their own. The child may also be required to file their own tax return if they exceed this threshold.

However, exceeding the $2,500 unearned income limit does not automatically disqualify a child from being claimed as a dependent. The key factor remains whether the child provides more than half of their own support.

Gross Income Threshold for Dependents

In addition to the earned and unearned income rules, there is a gross income test that applies to dependents who are not full-time students or who are over the age of 18 but under 24. In this case, the dependent’s gross income must be less than $4,700 in 2024 for the parent to claim them as a dependent. This rule does not apply to children under 19 or full-time students under 24.

3. The Support Test: Determining Financial Dependency

The support test is one of the most critical factors in determining whether a child can still be claimed as a dependent. Even if a child earns a significant amount of income, they can still be claimed as a dependent if they don’t use that income to provide for their own living expenses.

The support test considers the total financial support required for the child during the tax year and whether the child provided more than half of that support. Support includes expenses such as:

• Housing (rent, mortgage, utilities)
• Food and groceries
• Clothing
• Medical and dental care
• Education costs (tuition, books, supplies)
• Transportation
• Recreation and entertainment

For example, if it costs $15,000 to support a child for the year, the child must not have provided more than $7,500 of that amount through their own income to be considered financially dependent.

Parents should track how much they spend on supporting their child throughout the year to ensure they meet the support test. If the child earns income but uses it primarily for discretionary expenses (such as saving for a trip or buying personal items) while the parents cover basic living costs, the child can still be claimed as a dependent.

4. When Does a Child Need to File Their Own Tax Return?

Even if a child can still be claimed as a dependent, they may be required to file their own tax return under certain circumstances. Here are the situations in which a child must file their own tax return:

• Earned income: If the child’s earned income exceeds $13,850 (for the 2024 tax year), they must file a tax return.
• Unearned income: If the child has unearned income exceeding $1,250 for the year, they must file a tax return.
• Combined income: If the child’s gross income (earned and unearned combined) exceeds the greater of $1,250 or their earned income plus $400, up to a total of $13,850, they must file a tax return.

If a child is required to file a tax return, it does not necessarily disqualify them from being claimed as a dependent. They can still be listed as a dependent on their parents’ return as long as they meet the other qualifications.

5. Tax Benefits for Parents Claiming a Dependent Child

Claiming a child as a dependent comes with several valuable tax benefits, which is why it’s important to understand the rules and maintain the ability to claim them.

Child Tax Credit

The Child Tax Credit is one of the most valuable tax credits for families with dependents. For children under the age of 17, parents may be eligible to receive up to $2,000 per child as a tax credit, depending on their income level. If a child turns 17 during the tax year, they are no longer eligible for the full Child Tax Credit, but parents may still be eligible for the Credit for Other Dependents, which offers up to $500 per qualifying dependent.

Earned Income Tax Credit (EITC)

For low- to moderate-income families, claiming a dependent child can make them eligible for the Earned Income Tax Credit (EITC), which provides a refundable credit to reduce taxes owed. The credit amount varies depending on income and the number of dependents in the household.

Education-Related Tax Credits

Parents of dependent children who are full-time students in college can also benefit from education-related tax credits, such as:

• The American Opportunity Tax Credit, which is worth up to $2,500 per year for eligible college students.
• The Lifetime Learning Credit, which provides up to $2,000 per tax return for qualifying education expenses.

Head of Household Filing Status

Single parents who claim a dependent child may be able to file as Head of Household, which offers a higher standard deduction and lower tax rates compared to filing as single.

6. When Does a Child Stop Qualifying as a Dependent?

There are several situations where a child will no longer qualify as a dependent, including:

• Age limit: Once a child reaches 19 years old (or 24 years old if they are a full-time student), they may no longer qualify unless they are permanently disabled.
• Support test failure: If a child provides more than half of their own financial support, they cannot be claimed as a dependent, regardless of their age.
• Marriage: If the child gets married and files a joint tax return with their spouse, they typically cannot be claimed as a dependent unless they meet certain exceptions.

Conclusion: How Much Money Can a Child Make and Still Be Claimed as a Dependent?

A child can earn any amount of earned income and still be claimed as a dependent as long as they are not providing more than half of their own financial support. When it comes to unearned income, the threshold is $2,500 before special tax rules, like the “kiddie tax,” come into play. Regardless of income, the support test remains crucial—parents must provide more than 50% of the child’s financial needs.

By understanding these IRS rules and income thresholds, parents can maximize tax benefits while ensuring they correctly claim their child as a dependent. For families with questions about their specific situation, consulting with a tax professional is always a good idea.