Law

Claiming a Dependent

Claiming a dependent on your taxes can save you thousands of dollars per year. Now that we’ve captured your attention, let’s review the logistics which include the IRS regulations and qualifications. If you have children or members of your family who rely on your earnings, you may be able to claim one or more of them as dependents. In order for your child to qualify, they must either:

  1. Live with you for more than 6 months and be age 18 or younger.
  2. Or under the age of 24 if they’re a full-time student (at least 5 months out of the year). 

One exception to this rule is if the child provides more than half of his/her own monetary support. If that’s the case, then they are not eligible to be a dependent. There are also a number of other special regulations for children receiving financial support from two or more individuals, for example households with divorced or separated parents. In this scenario, consult Publication 504 for IRS tax help.

Note: There are exemptions if your child does not meet the age restrictions or relative status as long as he/she can prove an income under $3,900 and that you provide the majority of their financial needs.

Children are the not the only relatives who may be claimed as dependents. If you give support to parents, grandparents, siblings, aunts, uncles, stepparents, or even in-laws you can claim them as dependents assuming they adhere to the following considerations within the tax-applicable year:

  • A citizen or resident of the United States, Canada, or Mexico.
  • Receive more than half of their financial support from you.
  • Less than $3,900 of income during the year, not including Social Security benefits.
  • Did not file a joint income tax return with any other citizen.
  • Are being claimed by only you.

The Tie-Breaker

In 2005, the IRS passed a set of rules that regulate the way dependents could be claimed in households where parents were either divorced or separated. Generally, the home in which the child resides in for more than half the year is the one who’s eligible to claim the exemption.

What if neither parent has custody for more than half the year? It’s simple, neither individual can file the claim. It’s important to keep in mind that in the event that one ex-spouse remarries, the new joint income will also count towards the child’s financial support calculation. So as a general rule of thumb, the parent who contributes more to the child financially (care, housing, food expenses) is the one qualified to claim the dependency exemption. Levy & Associates offers IRS tax help if you’re unsure which parent has authority over claiming a dependent or any other matter regarding your financial affairs.

The bottom line is that these exemptions can equate to big savings when it comes to your taxes and returns. Make an effort to explore all your options when it comes time to file and exhaust all your options in terms of eligible deductions.

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