Does Your Roommate Qualify As a Tax Deduction?

February 13, 2012 | By: Charles P. Corsello, EA

tax deductions and roommateThe current economy is changing the makeup of our households. With unemployment high, many are finding that they are supporting relatives and non-relatives alike by allowing them houseroom.

While you might be allowing someone in need of help to live with you out of the goodness of your heart, it is worth considering that your roommate just might be a dependent – and tax-deductible.

What is a Dependent?

If your roommate qualifies as a dependent, it’s worth an exemption on your return – amounting to a $3,700 deduction currently. On top of that, your dependent roomie might also qualify you for other tax breaks, including the Dependent Care Credit, Earned Income Tax Credit, and Child Tax Credit. However, there are additional requirements for those credits, so don’t assume that you have a credit just because you can take an extra dependent exemption. Even if you don’t qualify for those credits, the deduction can still be a big deal.

But who qualifies as a dependent? Your first step is to figure out what category the dependent falls into. A “qualifying child” must be under the age of 19 by year’s end and live with you more than half the year, or be under 24 and a full-time student. It doesn’t matter your income; you receive the deduction for a qualifying child.

Qualifying Conditions

If your roommate isn’t a “qualifying child” you need to consider the current situation in your home or apartment. The IRS views another person living there as a “qualifying relative,” even if he or she isn’t related to you. However, in order to claim the roomie as a dependent, the following conditions must be met:

  • Your roommate must be a U.S. citizen
  • He or she can’t have earned more than $3,699 in the past year (disability payments and Social Security payments won’t affect this limit)
  • The roommate can’t have filed a joint tax return
  • You must have paid for at least half of the person’s living expenses

When these conditions are met, you are eligible to claim the person as a dependent. This is most easy to prove to the IRS when the person is question is living with you. If you have an actual relative who isn’t living with you, though, you can still claim the dependent exemption, if you are providing more than half the support for the cost of living (the most common example is having a grandparent or parent in a nursing home). Really, the most crucial part of claiming a dependent is being able to pass the “support test,” showing that you provide more than half the support for living expenses.

Realize, too, that two people can’t claim a dependent exemption on their tax returns. You and a sibling can’t both claim your mom as a dependent when she’s living in the nursing home. Before you claim the exemption, make sure that no others are claiming the exemption on their tax returns. If you have a question about whether or not someone qualifies as a dependent, consult a knowledgeable tax professional who can help you determine whether or not your roommate qualifies as a dependent.