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Tags: finance, income tax, claiming a dependent on your tax return
 With the coming of tax day on April 15th people are in search of any and all possible exemptions and deductions on their return in order to lower their tax liabilities. One way to do this is by claiming a dependent on your tax return. Claiming a dependent allows you to get additional exemptions for each one and may even qualify you to certain credits.
These include child tax credit, child care tax credit, and the earned income credit. You may also be able to change your filing status to that of head of household if you are unmarried and supporting a qualified person. However, you need to know if the person you are supporting can be claimed as such.
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In claiming a dependent the person(s) need to meet one of two criteria; (1) qualifying child, or; (2) qualifying relative. In claiming a dependent as a qualifying child four criteria must be met. First, the person must be your own, a step, adopted, or foster child(ren), a brother or sister, or their descendants.
Second, they must have lived with you for more than half a year. This means that when claiming a dependent they must have stayed with you for 6 months plus one day. In cases of joint custody where the child(ren) stayed with both parents, the parent with whom the child(ren) stayed the longest gets to claim the child(ren) on their return.
In the rare occasion where the child(ren) stayed equally between parents, the one with the higher adjusted gross income wins. Third, in terms of age, they should be under 19 years of age at the end of the year or 24 as a full time student 5 months out of the year, or any age as long as they are totally and permanently disabled.
Finally, they must not have provided more than half of their own support. But if for some reason they don’t fall under the qualifying child(ren) criteria they may still fall under the qualifying relative criteria. In claiming a dependent as a qualified relative there are also certain criteria that needs to be met.
First, they can either be brother, sister, stepbrother or stepsister, father, mother, stepfather, stepmother, grandmother, grandfather, son or daughter-in-law, sister or brother-in-law, nieces, nephews, aunts and uncles, or an individual that for the tax year has the same principal place of residence as you and is a member of your household (and whose stay does not violate the law of your jurisdiction).
As to this last category a residency test may be required. This means that you have to show that they have stayed with you the whole year. Second, they make less than the allowable personal exemption rate during the tax year. For tax year 2008 this would be $3,500. Also, any excludable income like exempted interest, disability, and certain social security benefits from the claimed dependent's gross income are disregarded in the calculation.
Third, you must have given more than half of their total support for the year. And finally, when claiming a dependent under the qualified relative status make sure that they have not been used as a qualifying child(ren) by another taxpayer. These people need to at least be a citizen or legal alien in the country.
At the same time if they have a spouse and are filing jointly they cannot be claimed as a dependent. Note that in claiming a dependent, regardless of whether you use their exemptions or not, they may not be allowed to claim a personal exemption in their tax return. Also, if someone else is can claim you as their dependent then you cannot claim anyone else.
The rules for claiming a dependent is for you to use to help lessen your tax burden. Use them. That’s why they’re there.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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