Getting organized and ready to file your taxes is never easy, and it becomes even more complicated when you have dependents to claim. Whether you have small children, an elderly parent or a college-aged child under your roof, we're here to make it all make sense.
A dependent entitles you to a number of tax breaks, including an exemption on your tax return to reduce your taxable income. The exemption amount for 2012 is $3,800 per person; you can see how quickly those exemptions can add up to tax savings.
Dependents also entitle taxpayers to other credits and deductions including the child tax credit ($1,000 per child for 2012) and the earned income tax credit (up to $5,891 with three or more qualifying children for 2012). Additionally, funds spent on child care and medical expenses for qualifying dependents may result in tax breaks.
With that in mind, it makes good tax sense not to overlook who might qualify as your dependent. It also makes good tax sense to understand who doesn’t qualify as a dependent. A spouse can never be a dependent for tax purposes even if you provide most of the support for your spouse.
Similarly, any person that can be claimed as a dependent on another tax return will not qualify as your dependent: Only one person can claim an individual as a dependent. That also means that children who file as independent on their own tax returns cannot be defined as a dependent on a parent’s return. Now that we’ve sorted that out, who’s left? A qualifying dependent for tax purposes must be either your qualifying child or your qualifying relative.
A person is your qualifying child if that person meets all of these tests:
Even if all of the above tests are met, a child is not considered to be your qualifying child if you are not required to file a federal income tax return. Why does this matter? If you don’t claim the child but could have except that you didn’t file, another taxpayer may be able to claim the child as a qualifying relative.
A person is your qualifying relative if that person meets all of these tests:
Of course, those are the easy rules. Things are more tricky for special circumstances, like divorce. In most cases, because of the residency test, a child of divorced or separated parents is considered the qualifying child of the custodial parent — that makes sense, right? However, a special rule might apply; ask your tax professional if you’re not sure.
It’s also worth keeping in mind that a dependent must generally be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico and have a valid tax ID number. Exceptions may also apply for adopted children.
So your mom who lives with you? Your college-aged child who doesn’t? Your adult child who has moved back home? They could theoretically all qualify as dependents if they meet the tests for qualified children or qualified relatives. Be sure to check with your tax professional if you have questions: Dependents allow you valuable tax breaks that you don’t want to miss.
Updated by Bethany Ramos on 2/8/2016
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