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Posted by Jim McClaflin, EA, NTPI Fellow, CTRC

What are Tax Dependents: Important Things to Note

What are Tax Dependents: Important Things to Note

A tax dependent is someone with connections to you that permits some tax deductions and credits like the head of household, the child and dependent care credit, the child tax credit, and the earned income tax credit. The dependent can be a child or relative. Even with this, determining if the person is qualified is difficult. However, here is a rundown of what dependents are. 

Why claim someone as a dependent?

Someone with a family needs to be aware of this dependent strategy in order to save money on taxes. In the 2017 tax year, every dependent on your tax filing is a $4,050 reduction on your taxable income. Meanwhile, the tax year of 2018, 2020, and 2022 have different definitions of exemption deductions, like:

  • A raise in the standard deduction

  • A higher Child Tax Credit of up to $2,000 per qualifying child

  • A higher Additional Child Tax Credit of up to $1,500 per qualifying child for 2022

  • A new Credit for Other Dependents up to $500 per qualifying dependent

However, in the 2021 tax year, the American rescue Plan raised the Child Tax Credit to $3,600 or $3,000. The calculation was based on the child’s age, and it is refundable. The IRS implements ways like an advance payment of the 2021 Child Tax Credit to make the disbursement faster. Meanwhile, the 2022 claim for Other Dependent Credit is $500. However, the dependent rules extend to; 

  • The Earned Income Tax Credit

  • Daycare expenses issued by the Child and Dependent Care Credit 

  • Family or children’s medical expenses

  • Itemized deductions and other tax credits concerning kids or family problems.

You can either make or owe money in this situation because the rules are complex, especially when you have a child in college, a cousin that visits in the summer, or a child with a part-time job. 

Qualifying Children 

Here are the criteria with which a child can qualify as a dependent:

  • The person is either your child, foster child, stepchild, half-sibling, step-sibling, or a descendant of the above criteria.

  • You must be older than the person, and the child should be below 19 of the concluding tax year and shoulder be below 24 for a full-time student or should be disabled.

  • You must have the child for more than six months with few exceptions like military deployment and schooling. However, they must return home after their service. 

  • Your child must be unable to pay up to half of their support during the tax year.

  • The dependent must be claimed only once.

Qualifying Relatives

Here are the criteria for qualifying relatives:

  • The relative must spend a whole tax year with you if there are no close relatives like parents or grandparents. However, the IRS has a list of relatives not considered under this law.

  • They cannot be claimed as a qualified child by another taxpayer.

  • They earn less than $4,300 or less for the tax year—however, the limit increases according to economic growth.

  • You must provide up to half the relative’s upkeep for the year.

How to Claim Dependents

You can use Form W 4, the Employee’s Withholding Certificate, for the employer to withhold taxes for dependents, or Form 1040, the standard US Individual Tax Return, with a higher space to accommodate more dependents. 

However, to effectively claim a dependent on your tax return, you must have the full knowledge of the criteria that permits that person as a dependent. Making the wrong claim will catch the attention of Uncle Sam, leading to penalties and interest. In addition, you will need to file the correct tax return, which must be submitted before the deadline to avoid additional penalties or interest from the IRS.



Jim McClaflin, EA, NTPI Fellow, CTRC
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