Guidelines for claiming a dependent
If you either meet the requirements prescribed by the IRS for claiming tax dependency or if you have a child who does, then you may be able to reap certain benefits by utilizing this great tax relief opportunity.
A dependent is defined as a person (other than the taxpayer themselves or their spouse) who gives the taxpayer the right to claim tax-related benefits such as a dependency exemption, head of household filing status, the Child Tax Credit, and the Child and Dependents Care Credits. This right generally decreases the amount that the taxpayer owes in taxes.
What this also implies is that the nature of the relationship between you and your dependant must be one that allows you to claim those deductions and credits. A dependant must either be your child or your relative who meets the requirements for claiming tax dependency.
Who qualifies as a Dependant?
Before we get to explaining what qualifies an individual to be a dependant, it is first important to note that since 2018, a new rule stipulates that claiming dependants no longer gets you a personal exemption for them.
This is so because the personal exemption has been replaced with a higher standard deduction. Now, let us get to explaining what qualifies an individual to be a tax dependant.
Firstly, your dependant must be someone who relies on you for support. What this means is that you must have provided for at least half of that individual’s needs (through the provision of basic necessities such as food, shelter, clothes, etcetera) throughout the year for which you are filing the returns.
Secondly, a dependant is usually (but not limited to) your child or relative. There are also rules that stipulate the conditions that your child/relative must meet in order to qualify. They are:
- Dependants are allowed to be married. They may even have their own tax returns. They are, however, prohibited from filing jointly for the year (except in cases where the joint filing was simply to claim a tax refund).
- A dependant is required to be either a citizen of the United States, a U.S national, or a resident alien (also known as a permanent resident or a lawful permanent resident).
- A dependant must have a Taxpayer Identification Number. This is usually just a social security number; however, if the child doesn’t qualify for one, it can be an Individual Tax Identification Number (ITIN) or an Adoption Taxpayer Identification Number (ATIN).
In cases where your dependant is a child, here are the further requirements:
- The child must have lived with you for at least half of the year
- You must be related to the child either by blood, marriage, foster care, or adoption. The child may also be a descendant of someone who is directly related to you.
- The child who you are claiming as a dependant must be 18 or younger. However, if you are supporting your child through or past college level, then you can claim dependency for your 24-year-old child. The child, however, is required to have attended school full-time during at least five months of the year in which the tax return is being filed. It may also be important to note that the five months of school attendance do not have to be consecutive.
- The child is required to be younger than you (and your spouse in situations where you are filing a joint tax return). You are only exempted from this rule in cases where your child is disabled.
If you plan to claim other related persons (and even some unrelated persons) as a dependant, then here are some additional requirements:
- The person who you are claiming as a dependant on your tax return is not permitted to have an annual income that exceeds $11,000. This amount is, however, changed each year.
- The person is not allowed to be a qualifying child dependant of you or any other parent. What this means is that you cannot claim a person as a dependant if someone else (such as their biological parent) can as well.
- The person you are claiming as a dependant must either be related to you or must have lived with you as a member of your household.
Should a dependent file a Tax Return?
There are times when a dependant may be required to file a tax return. If their income is within the filing requirements for the IRS, then filing a tax return for the fiscal year may be necessary.
You may be required to file a tax return (regardless of whether or not you can be claimed as a dependant) if any of the following is true:
- If they have a net income of more than $400 (in cases where the dependant is self-employed)
- If the dependent has received unemployment income. This is income that is considered taxable by the IRS.
- If the dependant owes Alternative Minimum Tax. The AMT gives an individual an alternative set of rules with which to calculate their taxable income.
- You owe money in household employment taxes
- You owe additional taxes on a retirement plan (such as an IRA or any other tax-favored account), or on a health savings account.
- You have not repaid your Homebuyer Credit
- You owe Medicare or Social Security taxes on unreported tip income.
- You earned an amount exceeding $108.28 from a tax-exempt church or church-related organization.
- You have received a distribution from a health savings account or for an MSA account.
- You have received an advance payment on your premium tax credit.
If you are a dependant wondering whether or not you should file a tax return, then it is advisable to review the minimum income requirements (link) for filing a tax return and seek counsel on how to file a tax return.
It is also important to note that if you are a first-time filer, you may not be able to file your tax returns electronically. You can prepare your tax return electronically, print it, and then mail it to the IRS to file it. You will be able to file your tax returns electronically starting the following year.
Need someone to put you through the technicalities of claiming dependents on your tax return or file one on your behalf? Look no further; speak with a qualified tax professional now.
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