Claiming dependents on taxes can be a very beneficial and cost saving measure for those people who have children or other dependents, that they are caring for. Claiming a dependent provides taxpayers with substantial tax credits to help them offset the expenses they incur throughout the year. The Internal Revenue Service (IRS) develops the tax code by taking into account what it costs to raise and care for a dependent throughout the year. They take into account several factors including child care and education expenses. When filing taxes one should completely understand these different tax credits to ensure the maximum tax relief, but still stay under the proper tax rules. Claiming dependents on taxes can decrease the taxes owed, as well as offering parents and caregivers money back for taking care of the dependents.
The first thing to understand before claiming dependents on taxes is to comprehend exactly what the IRS’s definition of a dependent is. A dependent can be a child, other relative, aging parent, or any other person where the taxpayer is the primary caretaker. First, the dependent must be under the age of 19, or 24 if a full-time student, by the end of the tax year, or they have to be disabled. The dependent must live in the parent or caregiver’s home for at least one-half of the year and they must provide at least one-half of the support to raise them. If the care is split between two people, the one who the dependent lives with the longest during the year is usually the one to claim them.
One of the best options available when claiming dependents on taxes is the head of household option. If normally filing single or widowed with a dependent, the taxpayer can file head of household, which provides a higher tax exemption. The taxpayer will also be able to take a higher exemption by having a higher number of dependents. Depending on the taxpayer’s income level, the child tax credit can be taken providing even greater tax relief. If the taxpayer’s income falls below the IRS set limit they may qualify for the earned income credit which is a refundable credit that may allow the taxpayer to get money back on their taxes.
Keeping good records will also help taxpayers when claiming dependents on taxes. The IRS allows taxpayers to take credit on money spent for education, including expenses like tuition and books. Through the credit for child and dependent care expenses taxpayers will be able to receive tax relief for the money paid for childcare. When taking either one of these credits taxpayers must be certain to keep an accurate record and documentation of all money spent. Caring for a dependent can be very costly, but the IRS has set up a system to help give tax credits to offset some of these expenses.