Did you know that claiming dependents is the one item on your tax return that can potentially save you thousands of dollars? Claiming a dependent can sometimes even be the determining factor of whether a taxpayer is due a refund, or if money is owed. Because this one simple item can potentially make such a big difference on your tax return, it is wise to become familiar with the general rules involved with claiming a dependent on your taxes. Here’s a quick review of the basics of claiming a dependent.
Why Claim Dependents?
It is important to know if you can claim dependents on your tax return because you could potentially save thousands of dollars on your taxes. For the 2015 tax year, for each qualified dependent that you claim on your return, your taxable income is reduced by $4,000. But that’s not all, the rules regarding dependents also apply to other benefits such as dependent medical expenses, daycare expenses, and other deductions and tax credits that relate to child and family care and issues.
Who Qualifies As A Dependent For Tax Purposes?
While there are many different situations where even housekeepers might qualify as dependents, according to the IRS, the basic rules state that there are 2 types of dependents, qualified children, and qualified relatives.
- Claiming A Child Plain and simple, a parent can claim their children, including eligible grandchildren, stepchildren, foster children, and adopted children. The children must be under the age of 19. If the child is a full-time student, the age limit is 24. The child must live with you for more than half the year, but there are exceptions.
- Qualifying Relative It is common for people to provide support to parents or other aging or dependent relative. These relatives must also live at your residence all year, but there are exceptions and it is best to check with your tax consultant for the specifics.
For both types of qualified dependents, the dependent may have a job with earned income, but you must provide more than half of their financial support. There are several exemptions relating to the qualifications of dependents, so if your situation is not so simple, you’ll want to check with your tax preparer to see if your situation qualifies.
Don’t Sweat The Details
The rules guiding tax returns are difficult to stay on top of because they change each year. Don’t let yourself become bogged down by the confusing details. This year, turn over your tax preparation to E&Y Agency where we guarantee the accuracy on your returns. Our free E-file service for both Federal and State returns will allow you to access your refund as quickly as possible. Contact us today at our Troy, MI office at (248) 909-1331 to learn how you can save money on your tax return this year.
