Trying to get the biggest tax break is not easy in today’s times, especially when you earn a higher income. The good news is that claiming your dependents is a great way to help you get that tax break that you deserve. Let’s start by defining what a dependent is.
A dependent is someone who relies on you for financial and wellbeing support. Most people usually think of their children when they think of dependents but when it comes to taxes, dependent qualifications extend past just your children. Qualifying dependents can fall into one of two categories: a child or a relative . While most people do not think too much about the qualifications for their child, there are some rules that apply to both. First, the dependent must be a resident of the United States. Second, the dependent must not be claimed by anyone else; this typically applies to divorced parents each trying to claim their child (in favor of the parent with primary custody) or adult siblings trying to claim their elderly parents. Third, the dependent can file a joint return, but it may disqualify your ability to claim as a dependent. You can still be eligible to claim the dependent and they may file a joint return if their return is being filed as a claim for a refund of estimated or withheld tax and if neither spouse would have a tax liability if they filed separately. While these are the qualifications for both categories of dependents, each one has additional requirements that must be met before they can be claimed.
Children must be related to you; note that this is not limited to blood relation therefore, adopted and foster children are eligible to be claimed as dependents. Since you are claiming children as dependents, there is age requirements: dependents must be either under 19 years of age or 24 if they are a full-time student. Your children must also live with you for more than half of the year to qualify. A child away at school is also eligible so long as you provide half of their support. Finally, you must financially support them. This means that you must supply more than half of their necessary support such as food, clothing, and medical expenses. While this may sound like a lot, these qualifications are typically met in the average household so there is no need to worry.
Relatives are slightly more complex. For a relative to qualify as a dependent, the must live in your household for the whole year. Your relative, similarly to a child, must also have at least half of their support supplied by you. The final requirement is where it gets a little tricky. Your relative cannot make more than $4,400 in gross income for the year 2022 and 2023. This is usually the factor that disqualifies a lot of potential candidates. The good news is that if the relative satisfies these requirements, there is no age requirement, and they would qualify as a dependent. This may seem like a strenuous checklist to get through but the tax benefits that come from claiming your dependents simply cannot be ignored.
If you need any assistance with best practices for claiming dependents, please contact ADKF.