Big Question Susie maintains a household that includes a daughter (age 29) and a cousin (age 28). Susie says that she can claim the cousin as a dependent, but not her daughter. Could Susie be correct? Discuss the dependency exemption rules and how they would apply to this scenario.

Dependency Exemption Rules

Evaluating and entering the appropriate number of exemptions is a significant component of fulfilling the taxpayer’s return since a taxpayer is capable of claiming one exemption for every qualified dependent on their return; thus, lowering their taxable income. On the other perspective, dependents are considered as either a qualifying teenage or a qualifying relative of the taxpayer. The taxpayer’s spouse cannot be regarded as a dependent, however, can be claimed as a personal exemption with some example of dependents including a teenage, stepchild, brother, sister, or a parent (Overesch & Wamser, 2010). Therefore, according to Susie’s scenario, she is correct when she claims the cousin as a dependent and leaving behind her daughter who is less the same age as her cousin.

According to the internal revenue service rules, a child and adult relatives can be grouped as dependents if only they meet the revenue’s test thus qualifying as a dependent. On the same note, a relative can be defined in this case as a person who has lived with an individual for the whole year as a member of his or her household hence meeting the definition of a qualifying relative even if he or she is not related to him or her by blood or marriage. Therefore, this definition makes Susie’s cousin a dependent and leaving out her daughter. As children get older, they usually become more self-dependent and independent from the parents; thus, removing them from the bracket. In several occasions, one will also lose the ability to claim them as a dependent on the tax returns; therefore, if a child is over 18, or over 24 then one cannot argue her as a qualifying child any further (Overesch & Wamser, 2010). Even though, if Susie meets the rules to claim her daughter as a qualified, then she can still claim her as a dependent.

Reference

Overesch, M., & Wamser, G. (2010). Corporate tax planning and thin-capitalization rules: evidence from a quasi-experiment. Applied Economics, 42(5), 563-573.