Want to reduce your tax burden? Learn what the term ‘dependents’ mean as defined by the IRS. You will be happy to know that you can save up to $4,000 income tax for every dependent.
The rules for claiming dependents are applicable on other tax benefits like tax credits. Few tax credits are applicable to qualified dependents. A great example of this rule is witnessed in the Earned-income tax credit as well as on Child tax credit.
Moreover, you can avail a tax waiver on daycare expenses, itemized deductions, medical expenses, and tax credits involving children and other dependents in your family. To understand the eligibility rules for such tax benefits you can take the help of qualified tax preparers from the Financial Balance LLC company in Aloha who will explain the qualification rules properly.
Basic exemption rules for dependents
Certain family conditions do not qualify for dependent rules while claiming tax benefits. For example, you son is studying at college, your daughter is working part-time, or your cousin lives at your place during the summer. The tax preparers in Aloha will also mention the following rules when you think about claiming tax exemption for your dependents.
Citizenship
The first rule created by the IRS for claiming tax exemption for your dependent is based on his or her citizenship. The dependent must be:
· A US citizen; or
· Resident of the US, Mexico, or Canada for some time of the year; or
· Foreign child legally adopted and currently living in the United States; or
· Adopted child residing with you in a foreign country for the whole year.
Relationship
The first rule created by the IRS for claiming tax exemption for your dependent is based on his or her relationship with the taxpayer. To qualify for an exemption your dependent must either be:
· Your relative, or
· The dependent must reside with you for at least a year.
The tax preparers in Aloha will also explain that it is not mandatory that relatives should reside in your home in order to claim the tax exemption for dependents under the IRS. Even if a person stays at your house for a year, and he or she is not your relative, that individual can claim dependent exemption while filing their tax returns.
Joint Return
In case, the dependent wants to claim tax exemption, he or she cannot:
· File tax returns jointly with the spouse. The taxpayer can claim exemption for married dependent provided he or she fulfills the remaining eligibility conditions. In addition, the married dependent has to file his or her tax returns separately.
Gross Income
The dependent should not earn a gross income above $ 4,000.
Qualifying Child
To claim tax exemption for a child, the tax preparers in Aloha will advise you to answer the following questions.
1. Is the child directly related to the taxpayer? The dependent child should be any one of them – son, daughter, qualified foster child, stepchild, half brother, brother, half-sister, sister, stepsister, stepbrother, and adopted child. The tax preparers in Aloha can also help claim tax exemption for a child of any of the listed relatives.
2. The dependent child should be below 19 years; a regular student should be below 24 years of age. However, there are no restrictions if the dependent child falls under the category of permanent disability.
3. The child must reside with the taxpayer for more than six months.
4. In case you support your child financially, even when your child has a job, you can claim dependent exemption if you provide above 50% of his or her financial support.
5. In the case of divorced parents, the tax preparers from Financial Balance LLC will recommend the tax exemption rules mentioned under Publication 501 of the IRS; they are compliance rules for income, residency, and parentage of the dependent child.
Qualifying Relative
Providing financial support to aged parents does not qualify them for dependent exemption. The tax preparers in Aloha OR will make you aware about the following eligibility rules:
1. The IRS Publication 501 has mentioned about 30 types of relatives for whom you can claim dependent exemption.
2. In case you provide above 50% of the financial support annually for your relative, you can claim the amount as dependent exemption.
3. You must always remember that you cannot claim dependent exemption for a person twice. Secondly, you cannot claim the relative if his or her parents are claiming the exemption.
Taxpayers can avail the tax benefit of exemption for qualified dependents by hiring the professional services of Financial Balance LLC. The representatives will ask simple questions to determine how many members of your family qualify as a dependent for tax returns.
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