In order to be your dependents, your niece and her child must meet the following tests:

1. Qualifying child or qualifying relative tests;
2. Dependent Taxpayer test;
3. Citizenship or resident test; and
4. Joint return test

Refer to Publication 501, Exemptions, Standard Deduction and Filing Information, , or Tax Topic 354, Dependents for more information.

References:

• Publication 501, Exemptions, Standard Deduction and Filing Information

Source: www.irs.gov