Regulations and Requirements for Declaring a Tax Dependent

Tax dependents, which can earn you significant tax advantages, are either eligible children or qualifying relatives.

A child or relative who qualifies for certain tax benefits and deductions, such as the head of the household filing status, the child tax credit, the earned income tax credit, or the child and dependent care credit because of their traits and relationship to you is considered a tax dependant.

It might be challenging to determine if someone is a tax dependent. Here is a summary, but bear in mind that there are exceptions to every rule because this is a complicated area of the tax code. Consult IRS Publication 501 for complete information.

Who Qualifies as a Tax Dependent?

For tax purposes, there are two kinds of dependents:

  • A qualifying child.
  • A qualifying relative.

Qualifying Child

The child must fulfill all of the requirements below for you to list them as dependents on your tax return.

You must include the child in your family.

The test for relationships is this – Your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, or stepsister. Or a lineal descendant of any of those people must be the child.

Who Is Not a Tax Dependent

In most cases, these people won’t be considered your tax dependents:

  • A married couple typically files a combined tax return (there are a few significant but complex exceptions; for further information, see IRS Publication 501).
  • Anyone who is not a citizen of the United States, a resident alien of the United States, or a national of the United States. Or a citizen of Canada or Mexico (adoptive parents are an exception).
  • People who are employed by you.
  • Exchange students from abroad.

Tax Breaks When Claiming a Tax Dependant

You may receive significant tax benefits if you claim a dependant. Good tax preparation software, including those that take part in IRS Free File, should enquire about your eligibility.

filing as the household’s head. With this filing status, you are eligible for greater tax breaks and lower tax rates than if you had filed as a single person.

Child tax credit. With the potential for a $1,500 refundable tax credit, you might receive up to a $2,000 tax credit for the 2023 tax year. (The operation of the child tax credit.)

Tax credit for child and dependent care. To pay for daycare and related expenses for a child under the age of 13, a spouse or parent who is unable to care for themselves, or another dependent so you may work, you can deduct 20% to 35% of up to $3,000 (for one qualifying dependent) or $6,000 (for two or more qualifying dependents). (The operation of the child and dependent care credit.)

Credit for earned income. Depending on your income, marital status, and the number of children you have, you may receive between $560 and $6,935 from this credit for the 2023 tax year. If your adjusted gross income is at or below $59,000, it’s something to consider. (The operation of the earned income tax credit.)

Adoption Credit. For 2023, this will cover adoption expenses up to $14,890 per child. (The adoption credit’s operation.)

Getting Ready for Tax Season

Costly fines may result if you don’t pay all of your owed income tax. It is simpler to make sure that you are correctly computing the amount of income tax that you owe by using this tax form.

You probably already know that credits and deductions can assist you lower your taxable income. To find out the answers to frequently asked questions about this tax credit, contact our tax professionals from Your Part Time Accountant.