Claiming a dependent on your tax return can help save a lot of money each year. Some taxpayers may be unsure about who qualifies as a dependent, especially since a living situation can change year to year. Here’s all you need to know about dependents and your taxes.
What is a dependent?
In the tax world, a dependent is someone who can be claimed on your tax return because they rely on your financial support. While you cannot claim yourself or your spouse as a dependent, you can claim your children, relatives, or domestic partners as dependents, as long as they meet the requirements for a qualifying child test and qualifying relative test. All dependents must be a U.S. citizen or resident. They also cannot be claimed on another return or file a joint return.
What is the qualifying child test?
A qualifying child must one of the following relationships to you:
Son, daughter, or stepchild
Eligible foster child or adopted child
Brother, sister, half-brother, or half-sister
Stepbrother or stepsister
An offspring of any of the above
They must be under age 19, or age 24 if they attend school full time. Permanently and totally disabled children can be claimed at any age. The child must live with you for most of the year and you must provide more than half of their financial support.
What is the qualifying relative test?
You might also be able to claim qualifying relatives in your life if they lived with you all year long. You can claim someone who has not lived with you all year if they are:
Your child, stepchild, adopted child, foster child, or descendant of any of these
Your brother, sister, half-brother, half-sister, stepbrother, or stepsister
Your parent, stepparent, or grandparent
Your niece or nephew of your sibling or half-sibling
Your aunt or uncle
Your immediate in-laws, including son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
They cannot have made more than $4,400 in 2022 and you must have provided more than half of their total support.
What deductions and credits are available for dependents?
Child Tax Credit: The CTC is $2,000 per qualifying child under age 17 in 2022
Earned Income Tax Credit: While you don’t need children to claim the EITC, the credit does increase if you have children. For tax year 2022, you can claim a max credit of $3,733 for one child, $6,164 for two children, and $6,935 for three or more children.
Child and Dependent Care Credit: This credit is meant to help pay for daycare while you work, go to school, or if your parent is unable to take care of themself. This credit is worth 20-50% of up to $6,000 of expenses in 2022.
Adoption Credit: In 2022, you may claim a nonrefundable credit up to $14,890 of expenses that pay for the adoption of a child who is not your stepchild.
Higher Education Credits: The American Opportunity Tax Credit and Lifetime Learning Credit can be claimed for yourself, your spouse, or dependents who are enrolled in college, vocational school, or job training. You can get a maximum annual credit of $2,500 per eligible student with the American Opportunity Tax Credit. The Lifetime Learning Credit allows a credit of 20% of the first $10,000 in qualified education expenses, and a maximum of $2,000 per tax return.
Credit for Other Dependents: This nonrefundable credit allows a maximum credit of $500 for each dependent.
Tax Relief for Those with Dependents
Knowing the rules surrounding dependents and taxes is very important. Claiming someone on your tax return when they are not eligible can result in the IRS rejecting your return or an IRS audit. On the other hand, knowing these rules can help save money if you suddenly become financially responsible for another person, like a sick parent or a foster child. Optima Tax Relief can help with your tax debt situation. Contact us at 800-536-0734 for a free consultation.
