What is a dependent tax


Claiming Parents as Dependents for Tax Benefits

What is a dependent tax

The individual you are claiming as a dependent has to be related to you. Now when you are going to claim a parent as dependent, this is not an issue. In this too, in laws are allowed, but foster parents are not, unless they live with you for a year as a family member.

Obviously enough, the people you are claiming to be dependents for tax benefits have to be from the same country. If you are filing the taxes in the USA and you are an American citizen, your parents have to be the residents of the USA, Canada or Mexico.

While claiming parents as dependents on taxes, your parents cannot file a joint return. They should file separately. In case your parent or parents file a joint tax return just to get a refund, then you can think of claiming them as dependents.

A parent who is being qualified or nominated for personal exemption should have a gross income of more than $3,650 (approximately and this amount is liable to change). This does not include social security payments or tax-exempt income.

Half of the support for your parents has to be provided by you during the year. The support refers to money spent on basic necessities. Even if you pay for more than 10% of your parents' total support for that year, and with others expenses, in totality contribute to half of your parents' support, you can claim parents as dependents on taxes.

what is a dependent tax

What is a dependent tax

The tax laws' definition of a dependent is very important when figuring out what tax filing status a taxpayer can file as and when claiming tax exemptions for a dependent. Many taxpayer mistakenly think that just because he or she has a child who is dependent on him or her, the child is considered a dependent child and tax exemptions are allowed. This is not the case. Tax laws' definition of what a dependent is can be complicated. Below is the definition of a dependent based on the IRS tax laws.

What is the definition of a dependent?

First of all there are two types of dependents according to the IRS tax laws. They are qualifying child and qualifying relative. Below is a chart to help a taxpayer determine if his or her dependent qualifies as either a dependent child or a dependent relative in order for him or her to claim tax exemptions for a dependent.

The questions below apply to the taxpayer who is trying to claim a tax exemption for a dependent as well as his or her spouse if he or she is married and filing jointly.

What is a dependent taxWhat is a dependent taxYES What is a dependent tax

What is a dependent tax

What is a dependent taxWhat is a dependent taxYES What is a dependent tax

What is a dependent tax

What is a dependent taxWhat is a dependent taxNO What is a dependent tax

What is a dependent tax

If the dependent in question passes all the tests for a dependency above, then the dependent in question could qualify as a qualifying dependent for tax exemptions if the dependent is either a qualifying child or a qualifying relative (even those who do not live with the taxpayer). The next step from here is to check to see if the dependent is a qualifying child or a qualifying relative.

What Is the Difference in Allowance & Dependent on a Tax Form?

When filing your tax returns, you should understand whom you claim as a dependent and the eligibility of the allowances you claim on your Form W-4. A dependent results in a direct tax deduction on your filed return. An allowance, on the other hand, results in reduced withholdings from your paycheck, but does not directly affect your tax liability when you file your returns.

The IRS allows many different deductions. An allowance claimed on your W-4 form helps to account for deductions you will ultimately make when filing your tax return. When you complete a Form W-4 for your employer, you mark the number of allowances you want to claim. The number of allowances directly affects the amount of tax the employer will withhold from your paycheck. The higher the number of allowances you claim, the less tax your employer will withhold. By claiming the right number of allowances, you should balance your tax obligations so that you do not have additional tax liability when you file your return and you do not receive any refund from the IRS.

Allowances reduce the amount of tax your employer will withhold; allowances do not reduce your actual tax liability. Because every taxpayers situation is different, you have to carefully consider how many allowances you want to claim on your Form W-4. The IRS provides a worksheet attached to the Form W-4 to help you calculate the number of allowances you should claim. Generally, you will want to claim allowances for yourself, your spouse and qualifying dependents.

You can only claim a person as dependent on your tax return if that person meets the IRS definition of a dependent. Generally, the IRS defines a dependent as a person living in your household who relies on you for support. Special rules exist for children and your ability to claim them as dependents. According to the IRS, the child you claim as a dependent must be a birth child, legal stepchild or a foster child that you directly take care of. In most cases, you can not claim a dependent child older than 19 years of age at the end of the tax year unless that child was enrolled full time in school. In that case, the IRS allows you to claim the child as a dependent until the age of 24.

A dependent must meet the IRS criteria for a dependent by passing key tests. These tests examine the relationship, residency, age and support you provide for the claimed dependent. In most cases, the dependent has to live with you at least half of the year, and you must directly provide the dependent with more than half of his support. Talk to a tax accountant or attorney to make sure someone you care for qualifies as a dependent before you claim him as a dependent on your tax return.

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Who Qualifies as a Dependent for Tax Purposes?

Many taxpayers mistakenly pass up valuable tax exemptions, not realizing that they qualify for them. For example, you may be entitled to additional dependency exemptions if you support your elderly parents, other relatives, or even people not related to you who live in your household. If you provide more than half the support for anyone and you haven’t claimed the person as a dependent in the past, make sure you read and understand these rules. Each dependency exemption you claim is worth a $4,050 deduction (2016 and 2015).

You may claim one dependent exemption for each child who is what the IRS calls a “qualifying child.” A qualifying child is:

  • related to you—your son, daughter, stepchild, adopted child, foster child, brother, sister, stepbrother, stepsister, or a descendant of any of them (for example, your grandchild, niece, or nephew).
  • under age 19 (or a student under 24)—the child must be under age 19 at the end of the tax year, or under age 24 if a full-time student for at least five months of the year, or any age if permanently and totally disabled at any time during the year.
  • not self-supporting—did not pay for over half of his or her own support during the year.
  • lives with you—either for more than half of the year or falls within special rules for children of parents who are divorced, separated, or living apart (temporary absences for things like schooling, medical treatment, vacations, business, or military service don’t count.)
  • U.S. citizen or resident—a U.S. citizen, U.S. national, or resident of the United States, Canada, or Mexico for some part of the year.

Most qualifying children are the biological, adopted, or stepchildren of the taxpayers who claim them as dependents, but this doesn’t have to be the case. For example, a brother, sister, or grandchild can be your qualifying child if he or she is under 19, lives with you over half the year, provides less than half of his or her own support, and is a U.S. citizen or resident. Moreover, a qualifying child can be as old as 23 if he or she is enrolled in school full-time.

To obtain an exemption for a dependent child, you must list the child’s Social Security number on your tax return. No number, no exemption. This rule is intended to prevent people from claiming exemptions for children who don’t really exist. You may obtain a Social Security number for your child by filling out and filing Social Security Form SS-5. See the Social Security Administration website at www.ssa.gov for details. It takes about two weeks to get a Social Security number. If you do not have a required SSN by the filing due date, you can file IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. If you or your spouse is expecting a child, apply for a Social Security number at the hospital when you apply for your baby’s birth certificate. The state agency that issues birth certificates will share your child’s information with the Social Security Administration and it will mail the Social Security card to you.

Most dependents are taxpayers' children. But they don't always have to be. If you contribute toward the support of a parent or other relative (or even a nonrelative in some cases), you could be entitled to claim a dependent exemption for that person. Even if you haven’t taken a dependency exemption for the person in the past, in some cases paying just a few dollars more to support the person during the year could entitle you to a valuable exemption.

To be your qualifying relative, a person must pass three tests:

Member of household or relationship test

First of all, the person must either be related to you or live with you as a member of your household. “Related9rdquo; means the person is either:

  • your child, stepchild, eligible foster child, or a descendant of any of them (for example, your grandchild) (a legally adopted child is considered your child)
  • your brother, sister, half brother, half sister, stepbrother, or stepsister
  • your father, mother, grandparent, or other direct ancestor, but not foster parent
  • your stepfather or stepmother
  • a son or daughter of your brother or sister
  • a brother or sister of your father or mother, or
  • your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

If any of these relationships were established by marriage, they don’t count if the marriage was later ended by death or divorce.

The person’s taxable income must be very low—no more than the dependent exemption.

You must pay for over half the person’s support during the year (unless there is a multiple support agreement).

What is the Child and Dependent Care Expenses Credit and how do I qualify?

The Child and Dependent Care Expenses Credit is a non-refundable tax credit. The credit is applied against the net tax liability. If the credit exceeds the net tax liability, the excess credit cannot be refunded. The credit is allowed for certain household and dependent care expenses you incurred during the year that allowed you to seek or maintain gainful employment.

You qualify to claim this credit if you meet all of the following for the tax year:

  • Your Adjusted Gross Income is less than $100,000.00.
  • You had at least as much earned income as you paid for child or dependent care.
  • You have a qualifying individual.

A qualifying individual is one of the following:

  • A dependent of the taxpayer who is under 13 years of age and for whom the taxpayer is entitled to a dependent exemption credit.
  • The spouse of the taxpayer, if he or she is physically or mentally unable to care for him or herself.
  • A dependent of the taxpayer who is physically or mentally unable to care for him or herself and for whom the taxpayer was entitled to a dependent exemption credit without regard to the gross income limitation.

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