What it means
Tax law recognises that people often support family members beyond their own children. A qualifying relative is the category used for those cases.
To count, the person must pass several tests, and a failure in any one disqualifies them. The first test is the relationship or household test.
The person must either be a close relative, such as a parent, sibling or grandparent, or live in the taxpayer's home for the entire year as a member of the household. The second is the gross income test, which requires the person's taxable income to be below an annual limit set by the tax authority.
The third is the support test. The taxpayer must provide more than half of the person's total support for the year, including housing, food, medical care, clothing and similar costs.
Support provided by the person themselves, as well as government benefits used for their support, counts towards the total, which can make the calculation less obvious than it seems. There are further conditions.
The person must not be a qualifying child of the taxpayer or of anyone else, and must be a citizen or resident of an eligible country. A person who files a joint return with a spouse is usually excluded unless the return is filed only to claim a refund.
Claiming a qualifying relative may give access to credits or a favourable filing status, depending on current law. Because the amounts and rules change, a tax preparer should check each year.
Keeping records of payments, such as rent, medical bills and groceries, supports the claim if it is questioned. Records are the practical key.
The tax authority can ask for evidence of where the relative lived, what they earned and who paid for what. A simple spreadsheet of monthly payments, with receipts and bank statements attached, turns a difficult argument into a short conversation.
In practice
Real-world examples.
Example
A software developer pays most of the living costs of his widowed mother, who lives in a flat near him. Her income is low and she has no other help, so he claims her as a qualifying relative.
Example
A teacher takes in a cousin who lives with her for the whole year and has no income. The cousin meets the household test, and the teacher pays all the costs.
Example
A tax preparer reviews a client's claim for his father and finds the father received a pension large enough to exceed the gross income limit. She explains that he does not qualify, so the claim should be removed. She also recommends a simple annual log of support costs.
Formula
Calculation
Support percentage = amount the taxpayer provided / total support for the person
The taxpayer qualifies on this test if the percentage is more than 50%.
Suppose an elderly parent's total support for the year is $24,000. This includes housing of $12,000, food of $4,000, medical costs of $6,000 and other costs of $2,000. The taxpayer pays $15,000 of this, and the parent's own savings cover the remaining $9,000. The support percentage is 15,000 / 24,000 = 62.5%, which is more than 50%, so the support test is passed.Case study
Seen in the real world.
Meadowbank Tax Help is an illustrative, fictional advisory practice that was asked by a client named Tomas whether he could claim his aunt as a dependent. She lived in a flat he rented for her and had a small pension.
The adviser worked through the tests. The aunt was a relative, her pension was under the gross income limit, and Tomas paid $14,000 of her $20,000 total support, which was 14,000 / 20,000 = 70%.
In the illustrative result, Tomas was able to claim the aunt as a qualifying relative. The adviser told him to keep rent receipts, bank transfers and medical invoices for at least as long as the tax authority could ask for them, in case the claim was questioned. Tomas set up a folder for the aunt's papers and a monthly note of every payment, so any later question could be answered quickly.
Watch out
Common mistakes.
- Counting only cash given to the relative and forgetting housing, food and medical costs, which also form part of support.
- Overlooking the gross income limit, which can disqualify a relative who earns even a modest pension or interest.
- Claiming a relative who is a qualifying child of someone else, which is not allowed.
Questions
People also ask.
Can a friend be a qualifying relative?
Yes, if the friend lives in the taxpayer's home all year as a member of the household and passes the other tests.
What counts as support?
Housing, food, clothing, education, medical care, transport and similar costs, measured over the whole year.
How is the support test different from the household test?
One measures who paid, the other measures where the person lived or how they are related.
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