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الثلاثاء، 21 مارس 2017

Here’s Who the IRS Lets You Count as a Dependent (Hint: Not Your Cat)

One of the trickiest parts of completing your yearly tax return is figuring out who qualifies as a dependent.

Some examples are pretty obvious: Your 3-year-old toddler, for example.

But what about the elderly aunt who lives with you? Or a foster child? An adult cousin on permanent disability?

Let’s break down what makes someone a dependent and how to find out if you’re allowed to claim them on your taxes.

Why It’s Important to Include Qualifying Dependents on Your Taxes

Don’t overlook the impact dependents have on your taxes.

“For every qualified dependent you claim, you reduce your 2016 taxable income by $4,050,” explains Intuit.

Let’s take a look at that in practical terms.

If you have two children and made $20,000 last year, that means your total taxable income for 2016 drops to $11,900 — and that’s before you take any other deductions.

The lower your taxable income, the less you pay in taxes.

And who doesn’t like to pay less taxes?

It’s also important to figure out your qualifying dependents so you can deduct certain expenses associated with their care.

Who Qualifies As My Dependent?

The IRS breaks down dependents into two categories:

1. A qualifying child must:

  • Meet certain relationship criteria.
  • Be younger than you and:
    • Under 19 years old, or
    • A student under 24 years old on the last day of the tax year.
    • Have lived with you for more than half of the year, unless one of these special circumstances apply.

There is no age limit if your child is “permanently and totally disabled” or meets the qualifying relative criteria.

Additional restrictions apply, so be sure to consult the IRS guidelines for qualifying children for more information.

2. A qualifying relative:

  • Does not have to be related to you by blood.
  • Must have made less than $4,050 in gross income during the tax year.
  • Must have received more than half of their total support for the year from you.
  • May be any age.

Additional restrictions apply here too, so be sure to consult the IRS guidelines for qualifying relatives for more information.

If you provided most or all of someone’s financial support in 2016, it’s definitely worth looking into whether they qualify as a dependent.

That includes your parents or other older relatives, your boyfriend or girlfriend, or anyone else who lives with you — with one notable exception.

You cannot claim your spouse as a dependent, says the IRS.

The IRS has the final say on who qualifies as a dependent and who doesn’t. If you’re not sure, the agency’s interactive quiz can help you figure it out.  

Your Turn: Has claiming dependents made a big difference on your taxes?

Lisa McGreevy is a staff writer at The Penny Hoarder. She likes bringing you this information, but she is not a tax preparer, and this is not legal tax advice.

The post Here’s Who the IRS Lets You Count as a Dependent (Hint: Not Your Cat) appeared first on The Penny Hoarder.



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