What Is a Tax Dependent?

Claiming a tax dependent can significantly reduce your tax burden, but understanding who qualifies as a dependent is crucial. According to the IRS, a tax dependent must be your qualifying child or qualifying relative. This guide will help you navigate the complexities of tax dependents.

Who Is a Qualifying Child for a Tax Dependent?

The IRS has specific criteria for who can be considered a qualifying child. This includes not only your biological children but also stepchildren, foster children, siblings, and even grandchildren. Here are the key requirements:

• They must be related to you by birth or adoption (e.g., son, daughter, stepchild, foster child, brother, sister).
• They must be younger than you and your spouse and either under age 19 or under 24 if they are a full-time student.
• They must have lived with you for more than half the year.
• They must not provide more than half of their own support during the year.
• They are not filing a joint return, except for the purpose of receiving a refund.

Who Is a Qualifying Relative for a Tax Dependent?

If someone lives with you full-time and depends on you for support, they may be considered a qualifying relative. The IRS guidelines for qualifying relatives are as follows:

• They are not your qualifying child or the qualifying child of another taxpayer.
• They are related to you or live with you as a member of your household.
• They don’t have a gross income of $4,300 or more.
• They receive more than half of their support from you.

Interestingly, qualifying relatives do not need to be related to you. Even a roommate could qualify if they meet all the requirements.

How Much Are Tax Credits for Dependents?

Claiming dependents on your federal tax return can make a significant difference in your tax liability. Here are some of the tax credits you may be eligible for:

Child Tax Credit

The child tax credit provides up to $2,000 for each qualifying dependent child under the age of 17. This credit can lower your tax bill dollar for dollar.

Additional Child Tax Credit

If your child tax credit exceeds your total tax bill, you may be eligible for the additional child tax credit, which allows you to receive up to $1,600 as a refund.

Child and Dependent Care Credit

This credit provides 20% to 35% of up to $3,000 in qualified work-related care expenses ($6,000 for two or more dependents).

Credit for Other Dependents

If you have dependents who don’t qualify for the child tax credit, they may be eligible for a tax credit of up to $500.

Earned Income Tax Credit

Low- to moderate-income taxpayers may receive up to $600 as single filers; $3,995 with one qualifying child; $6,604 with two qualifying children; and $7,430 with three or more qualifying children, depending on income.

The Bottom Line

If you provide support to your children, grandchildren, family members, or others in your household, you may be able to claim them as dependents and save money on your taxes. However, make sure you’ve considered all of the IRS requirements for claiming dependents before you file.

Feeling overwhelmed? Contact O1ne Mortgage at 213-732-3074 for any mortgage service needs. Our experts are here to help you navigate the complexities of tax dependents and more.