Having your adult child move back home is a mix of emotions. There’s the comfort of having them under your roof again, the rediscovery of old routines, and maybe a little less space in the refrigerator.
But once everyone settles in, a new reality emerges: your finances have changed, and so has your tax return.
It can feel awkward to bring up money, but figuring out the tax implications is critical for both you and your child. Here’s a practical guide to the most common questions that come up when you have a “boomerang kid.”
The Big Question: Can You Claim Them as a Dependent?
Before you can figure out any of the tax breaks, you have to answer one question. Does your adult child legally qualify as your dependent? The IRS has a multi-part test. It’s not about feelings, it’s about the facts.
The “Qualifying Child” Test
This is the easier test to pass, but it has strict age limits. Your child must meet all four of these conditions:
- Relationship: They are your son, daughter, stepchild, foster child, sibling, or a descendant of any of them.
- Age: They were under age 19 at the end of the year, OR under age 24 and a full-time student for at least five months of the year.
- Residency: They lived with you for more than half the year.
- Support: They did not provide more than half of their own financial support for the year.
The “Qualifying Relative” Test
If your child is too old to be a Qualifying Child, you might still be able to claim them as a Qualifying Relative. This is common for children who are out of school but not yet financially independent.
- Not a Qualifying Child: They can’t be your Qualifying Child or anyone else’s.
- Gross Income: Their gross income for the year must be less than $5,200 (for tax year 2025). This is a tiny threshold and the biggest hurdle for most people.
- Support: You must provide more than half of their total support for the year.
The $500 Consolation Prize
If your adult child meets the dependency tests but is too old for the Child Tax Credit, you don’t walk away empty-handed.
You may be eligible for the Credit for Other Dependents, a nonrefundable tax credit worth up to $500 per qualifying dependent. And thanks to the 2025 Big Beautiful Bill tax law, this credit is now a permanent part of the tax code. It’s a direct, dollar-for-dollar reduction of the tax you owe. It’s not as generous as the Child Tax Credit, but it’s a valuable benefit that recognizes the financial reality of supporting an adult child.
The Health Insurance Domino Effect
Claiming a dependent has a direct impact on health insurance, and it can be a double-edged sword.
- Marketplace (ACA) Plans: If you get your health insurance through the Affordable Care Act Marketplace, your household income determines the size of your Premium Tax Credit (the subsidy that lowers your monthly premium). When you claim your adult child as a dependent, their income gets counted as part of your household income. This can reduce or even eliminate your subsidy, leading to a higher insurance bill.
- Coverage Until Age 26: Here’s some good news. The rule that allows you to keep a child on your health insurance plan until they turn 26 is completely separate from the IRS dependency rules. You can keep them on your plan, whether you claim them on your taxes or not.
The tax rules are just the black-and-white framework for a very human situation. The most important step is having an open conversation with your child. Deciding who claims the dependency exemption isn’t just about a $500 credit; it’s about establishing clear financial expectations and working as a team.
By handling these details proactively, you’re doing more than just filing your taxes correctly. You’re helping lay a stable financial foundation for your child’s next chapter.
