Should I add a dependent on this year's tax return?

To claim an adult sibling as a dependent, they need to meet the qualifying relative test. Here's what matters in your situation: Your sister needs to have lived with you as a member of your household for the entire year (this is different from the "more than half the year" test for children). Since she only moved in during August, unfortunately that disqualifies her for this tax year. However, if she continues living with you through this year, you likely can claim her next year. Also, her gross income must be less than $4,500 (for 2024 tax year). Since she made $8,700, she wouldn't qualify even if she had lived with you the whole year. The income test is pretty strict for adult dependents. You should definitely keep this in mind for next year though - if she continues to live with you and her income stays below the threshold, you could claim her as a dependent and possibly qualify for Head of Household filing status which gives better tax rates.

I was in a similar situation with my brother last year - super frustrating trying to figure out all the dependent rules! I ended up using https://taxr.ai to analyze our situation. You just upload your documents and it walks you through everything. The tool immediately flagged that I couldn't claim him because he made too much that year, but gave me all the requirements for next year. It even helped me understand which expenses I could document to meet the support test. Way less stressful than trying to interpret all the IRS language myself!

Just wanted to update - I tried taxr.ai after seeing the recommendation here. It was actually super helpful! I uploaded my niece's college tuition statement and my records of support, and it showed me I could claim the American Opportunity Credit even though I couldn't claim her as a dependent (because of the income limit). I didn't even know that was possible! Definitely going to save me about $1,500 on my taxes. The document analysis caught things I completely missed when reading the IRS website.

If you're having trouble getting clear answers about your dependent situation, I'd recommend calling the IRS directly. I know it sounds like a nightmare (it took me 3+ hours last year), but I recently used https://claimyr.com and it was a game-changer. They hold your place in the IRS phone queue and call you when an agent is about to answer. I got a definitive answer about my dependent situation directly from the IRS without spending my entire day on hold. You can see how it works here: https://youtu.be/_kiP6q8DX5c - totally changed my view on dealing with the IRS.

I'm actually shocked but I need to admit I was wrong about Claimyr. After being skeptical, I tried it for my dependent question about my parent who lives overseas. Was expecting it to be a waste of money or not work, but I got a call back in about 90 minutes (way faster than the 3+ hours I waited last time I called the IRS). The agent walked me through exactly which form I needed for foreign dependents and confirmed I was eligible for the credit. Not gonna lie, it felt really good to get a definitive answer straight from the IRS instead of guessing based on internet advice.

Don't forget about the support test too - you need to provide more than 50% of her total support for the year. Since she did have income for part of the year, you'd need to calculate if your support since August outweighs both her self-support from her income plus anyone else who may have supported her earlier in the year. Keep all your receipts showing housing, food, medical, etc. that you paid for!

Has your sister filed taxes in previous years? If she only made $8,700 last year, she might not even be required to file a return depending on her filing status. That could actually help your case for next year if she doesn't file as independent this year (though as others mentioned, you still wouldn't qualify for this year).

One thing to keep in mind for next year - even if your sister qualifies as a dependent, make sure she doesn't accidentally file as independent if she does end up getting a job. That's a common mistake that can mess up your dependent claim. You might want to coordinate with her on tax planning if she starts working again, especially around year-end. Also, if she's actively job searching, some of those expenses might be deductible for her (or you if she's your dependent), so keep track of things like resume services, interview travel costs, etc.