One of the greatest joys in life is having a baby or gaining a new member of your family. One thing people forget with the addition of a new family member is the tax benefit they now can receive. Dependents on your federal tax return can help cut down on the taxes you owe and help you save money. Like any tax break, there are some rules and regulations that you have to follow before you can claim a dependent.
What is a Dependent?
A dependent is a person who lives with you and who you provide for. There are two types of dependents, a qualifying child and a qualifying relative. Both types of dependents must meet the following qualifications; they must be a U.S. citizen, a U.S. national, a U.S. resident or a resident of Canada or Mexico. You must also be the only person claiming them. This means that if you claim a person, they can’t then take a personal exemption for themselves. You also cannot claim someone who is married and filing a joint tax return.
Along with the criteria mentioned above, a qualifying child must also meet the following criteria. They must be related to you. This means they can be your son, daughter, stepchild, eligible foster child, brother, sister, half-sibling, step-sibling or an adopted child. Your child must also be under the age of 19, unless they are a full-time student, then they have to be under the age of 24. Note, if your child is permanently disabled, there is no age limit to claiming them. Your child must also live with you for more than half of the year. There are several exceptions to this rule. To claim a dependent, you must also financially support that child. The child may still earn their own income, but you must provide over half of their support. If you are divorced with a child, make sure you or your husband are claiming the child, not both of you. Two people cannot claim the same child.
Although claiming dependents most often means you’re claiming children, it can literally be for anyone of any age. More typically, you see taxpayers using this when they bring in their aging parents. Like the children, there are other rules and stipulations to follow for claiming others. For instance, the relative must live with you for the entire year, or they must be on the list of qualifying relatives provided by the IRS. For income, they MUST make less than $4,150. This number is for dependents in 2018 and could differ in new tax years. You also must be providing more than half of their financial support. Lastly, you must be the only person claiming this individual on your tax return. For instance, you couldn’t claim your cousin living with you if their parents also claim them. With claiming a parent or relative as a dependent, you may also be able to deduct their medical expenses if you paid for them. You can claim these expenses as an itemized deduction on Schedule A. Keep in mind, total medical expenses including the cost of prescription drugs, equipment, hospital care, and doctors’ visits must exceed 7.5% of your adjusted gross income in order for you to claim them.
The deduction for a qualified dependent is one of the top tax benefits available to all taxpayers. Qualifying for this benefit can also help you benefit from other tax credits and tax deductions you might not know about. If you need help deciding if you should itemize your deductions or aren’t sure how to file your federal tax return, Polston Tax can help. We have a team of tax consultants and tax preparers that can help you not only file your tax return on time, but help you save money in the process. Call us today at 844-841-9857 or click below to schedule your free consultation.