W-4 Exemption for Taxpayer's Dependents

Will your child be starting a summer job? If so, they will be required to complete Form W-4 so their employer can properly calculate income tax withholding. However, if they meet specific requirements, they may claim “EXEMPT," resulting in no federal tax withholding and eliminating the need to file an income tax return next spring. Review the criteria below to determine if this applies to your child. 

Qualifying Child 

Age Requirements 

• The child must be under 19 at the end of the tax year or under 24 if a full-time student. 
• There is no age limit if the child is permanently disabled. 

Relationship to the Taxpayer 

• The child can be a son, daughter, stepchild, adopted child, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them. 

Residency 

• The child must have lived with the taxpayer in the United States for more than half the tax year. 

Filing Status 

• The child cannot file a joint return unless they're only filing to claim a refund. 

Qualifying Relative 

Relationship Test 

• The individual must have a specific relationship with the taxpayer, such as a child, stepchild, grandchild, sibling, parent, grandparent, aunt, uncle, niece, or nephew. Other relatives and even non-relatives may qualify under certain circumstances. 

Gross Income Test 

• The individual's gross income for the tax year must be below a certain threshold, determined annually by the IRS. 

Support Test 

• The taxpayer must provide more than half of the individual's total support for the year. 

Qualifying for Exemption from Federal Withholding 

OPTION 1: My child is claimed as a dependent on my tax return.

Step 1:

• If your child received a refund of all federal income tax withheld in 2023 because they had NO tax liability AND they expect a refund of all federal income tax withheld in 2024, continue to Step 2.

Step 2:

• If their income exceeds $1,300 AND includes more than $400 of unearned income (interest, dividends, etc.), they CANNOT claim “EXEMPT”.
• If their income will not exceed $14,600 AND unearned income will not exceed $400, they CAN claim “EXEMPT.”

OPTION 2: My child is not claimed as a dependent on my tax return.

• If your child received a refund of all federal income tax withheld in 2023 because they had NO tax liability AND they expect a refund of all federal income tax withheld in 2024 AND their income will not exceed $14,600, they CAN claim “EXEMPT.”

Claiming EXEMPT on Form W-4:

• Complete Steps 1(a) and 1(b) with identifying information.
• Write “EXEMPT” in the space below Step 4(c).
• Complete Step 5 by signing the form on the “Employee’s signature” line and including the date.

Important reminder – exempt status on Form W-4 is only valid for one year, so it will need to be filed every year such status is available.