When it comes to filing taxes, knowing how to file is an important part of completing taxes properly. This is because filing correctly could help you get the most from your tax return, and it could help prevent receiving any penalties from the IRS.
Claiming dependents could reduce the amount of your taxable income. A large part of filing taxes is figuring out how to claim dependents and who qualifies as a dependent. Figuring out the process of claiming a relative as a dependent on a tax return is fairly simple and only takes a few steps—from identification to filling out paperwork.
Step 1: Figuring Out Who Counts as a Dependent on Taxes
The first thing to do is to figure out who counts as a dependent on your taxes. Dependents are typically children or a relative that is receiving more than half of their financial support from the person claiming them on their taxes. These dependents must be U.S. citizens, permanent residents (aliens), or U.S. nationals. They must have a Taxpayer Identification Number (TIN) and can only be claimed as a dependent by one person.
Even if a potential dependent meets all of the requirements listed above, there are rules set in place to determine whether they can be claimed. Here are the following requirements for qualifying as a dependent—and the rules surrounding the claims on a tax return:
Requirements for Claiming Children
- Age: The child must be 18 or younger, or under 24 if they are a full-time student attending school at least five months out of the year. The child must be younger than the parents unless the child has a disability.
- Relation: The child must be related to the tax filer—by blood or by relation (i.e., step children, adopted children, foster children, or even grandchildren).
- Duration of Stay: The child must live with the parent for more than half of the year.
- Divorce/Separation: Only one parent can claim the child on their taxes.
- If a Child Files a Joint Return: If a child lives with you, is married, and is filing a joint tax return—that child cannot be claimed on your taxes.
Requirements for Claiming Other Relatives
- Duration of Stay: The person must live with you all year long.
- Potential Dependent’s Income: The gross income of a potential dependent cannot be over $4,050.
- Financial Support: You must have provided more than half of the financial support for this relative.
If you still have any questions check out Publication 501 for more information and details about the rules and regulations surrounding claiming dependents.
Step 2: Figure out What Forms to File When Claiming Dependents on Your Tax Form
Once you have figured out who your dependents are, you can begin to file the proper tax forms. To file income taxes, most people will have to use some variation of the 1040 form—1040, 1040A, or a 1040EZ form (1040EZ doesn’t allow filers to claim dependents). So for the purposes of claiming dependents, it may be best to stick to a 1040 or a 1040A form.
Step 3: Correctly Fill in the Right Information When Claiming Dependents
Here is the right way to fill out tax forms when claiming a person or multiple people as dependents:
Putting In Dependent Information
On the tax form—the first and second page—you will be given a few columns where the dependents you are claiming will need to be accounted for. In these columns, you will have to list the name and the Social Security Number (SSN) or TIN for each dependent. You will also have to state how the dependent(s) is/are related to you.
The next part is adding up the amount of dependents and claiming exemptions (these reduce the amount of taxable income—like deductions). If a person is married, they get one exception for themselves, one for their spouse, and one exception for each dependent. Once the number of exemptions is figured out, that number needs to be filled out on the second page.
The Child Tax Credit
The last part of claiming dependents on taxes is to check whether your dependents qualify for a child tax credit. This tax credit will reduce the amount of taxes paid straight from your tax return. In order for a dependent to qualify, they have to be a dependent child who meets the requirements for children dependents (found in step 1).
When filing taxes, it is important to know who you can claim as a dependent and how to include them on your taxes. Filing this information correctly on a tax form can make a huge difference in how much money you get back on your tax return. If a person is supporting other family members, they deserve to keep some extra money for those expenses, especially if they have children.
To make sure the tax system is fair to every American, it is important that everyone knows what dependents, exemptions, and child tax credits are—as well as how they work. There are many ways to file dependent tax forms, and although filling out one yourself is fairly easy—it doesn’t hurt to check out a professional business or use a professional tax filing software to get the most accurate tax forms.