Some households include extended family members. A child is sometimes eligible to be claimed as a tax dependent by more than one household member. Tax filers in multi-generational households must follow a specific set of rules to determine which filer is entitled to claim a child as a tax dependent.

The guidelines used to determine dependent eligibility are referred to as the tiebreaker rules. In addition to reducing the amount of taxable income, the inclusion of a dependent on a tax return may also entitle a tax filer to the following benefits.

  • The child tax credit
  • The child care credit
  • The earned income credit

The tiebreaker rules follow a specific order. The underlying reason for the tiebreaker rules is to provide a method for the IRS to quickly resolve disputes when two tax filers claim the same dependent. However, the tiebreaker rules also provide a practical guideline for determining who to include as a dependent during the preparation of your tax return.

Grandparent claiming a grandchild

A parent generally has first claim on a dependent child. Some multi-generational households include a single parent living with their own parent. A grandparent may be able to claim their grandchild who lives in the same household only if the parent of the child chooses not to do so. If the parent files a tax return but chooses not to claim the child, the grandparent's income must be higher than the parent in order for the grandparent to claim the child.

In some instances, a parent living with their own parent may not meet all of the eligibility requirements to claim their own child as a dependent. If they are eligible, the grandparent may claim the grandchild as a dependent, regardless of any difference in income.

One parent living elsewhere

A complication arises if the second parent of the child lives elsewhere and meets the eligibility requirements to claim the child as a dependent. If both parents file separately, the parent with whom the child lived the longest during the year may claim the child. If the child lived with both parents an equal number of days, the parent with the higher income is entitled to claim the child.

Another household member aside from a grandparent might also be eligible to claim a child. A tax dependent can be a niece or nephew, as well as a descendant of a niece or nephew. Contact a tax service and check out for more information about tax preparation.