Who's Your Dependent Part 3: Qualifying Children
Claiming children can be a tricky thing. Dependent children is one of the things IRS looks closely at every year. There are many laws, and you can use those to your advantage if you know how. Let's dive in and learn about claiming children, and how that affects your taxes.
There are additional tests that must be met to claim the realtives in this category as dependents. All of the following must be true in order to claim your child realative. You may wish to review Part 2 on determining who is your child.
The child lived with you more than 1/2 of the year
Temporary absences do not count against time the child lives with you. Temporary absences include those due to illness, education, business, vacation, or military school. A child who is born or dies during the year is considered to have lived with you for the entire year.
The child did not provide more than 1/2 of their own support
You have to examine where the child's financial support comes from to determine if it is considered provided by them or not. Payments that are not considered provided by the child include (not limited to) foster care payments, scholarship payments, & welfare payments. Social security payments the child recieves whether paid directly to the child or to the child's guardian ARE considered provided by the child. Use the support worksheet to help determine if the chid meets this test.
The child is under 19 (25 if full-time college student), younger than you, or disabled
The age considered is the age of the child on December 31st. To be considered a full-time college student the child must be full-time any part of any 5 calendar months during the year. The child must be younger than either you or your spouse, but not both. Disabled children must be permanently and totally disabled. The IRS defines disabled as a child who "cannot engage in any substantial gainful activity because of a physical or mental condition (and) a doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death." (IRS Pub 17 p. 28)
The child is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico. Certain adopted children are excluded from this test.
Contact a professional for more information.
The child is not being claimed by another taxpayer who has a higher claim than you (see Part 3 for more on tie-breaker rules)
The child is not filing a MFJ tax return
You can claim your child who files a joint tax return if they have no tax liability and only file to claim a refund.
So, you know that your child can be claimed as YOUR QUALIFYING CHILD DEPENDENT. How does that help your tax return?
There are several additional benefits that go along with claiming a qualifying child, other than the dependency exemption, that you may be able to take advantage of. You have to qualify for each of these benefits seperately, and this will not cover those details, however, you should speak with a tax professional to see if you qualify. The following is a list of the additional benefits that go along with claiming a qualifying child, and their potential values.
Child Tax Credit - up to $1000 per child (non-refundable)
Additional Child Tax Credit - up to $1000 per child minus the Child Tax Credit you were able to use (refundable).
Child & Dependent Care Credit - a percentage of your eligible child care costs up to a maximum of $1,050 for 1 child or $2,100 for 2 or more children.
Head of Household Filing Status - Eligible taxpayers may benefit from a higher standard deduction (than Single Filing Status), resulting in a lowered tax liability.
Education Credits or Deduction - There are several tax benefits for children with eligible college expenses. The amount varies, but can be worth up to $2,500.
Earned Income Credit - This credit is based on your earned income and the number (0 to 3 children) of qualifying children you have. Having a child increases the maximum credit you will recieve. If you do not have a qualifying child it is less likely you will get this credit (though it is not the only factor).
I hope that you have learned something that will help you on your tax return! Happy filing!
You should call a tax professional to be guided through the process if you need help. The information in this article is for informational purposes only, and should not be used as express advice for any one particular individual's tax decisions exclusively. You should always consult your tax advisor as all individuals have unique tax puzzles and the pieces are never the same.