Claiming one or more dependents on your tax return can save you a fair bit of money. The Internal Revenue Code is set up to allow taxpayers to deduct personal exemptions for themselves, as well as for each dependent they claim. These deductions subtract from the income they must pay taxes on. A slew of tax credits are based on the number of dependents you have, too, including the child tax credit, the child and dependent care tax credit and the earned income tax credit.
Wait, there's more. If you're not married and you support a dependent, you may be eligible for the head of household filing status.
Having dependents is definitely a good thing at tax time, but it's important to know the rules that determine who you can claim and under what circumstances.
Your dependent must be a U.S. citizen, a national or resident alien of the United States, or a resident of Canada or Mexico.
You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico.1
Information on EIC and Dependents can be found at the IRS website, http://www.irs.gov.
Publication 596 covers Earned Income Tax Credit and Publicatin 501 covers Dependents.
Example 1—child files joint return.
You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. He earned $25,000 for the year. The couple files a joint return. You can’t take an exemption for your daughter.
Example 2—child files joint return only as claim for refund of withheld tax.
Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. They lived with you all year. Neither is required to file a tax return. They don’t have a child. Taxes were taken out of their pay so they filed a joint return only to get a refund of the withheld taxes. The exception to the joint return test applies, so you aren't disqualified from claiming an exemption for each of them just because they file a joint return. You can claim exemptions for each of them if all the other tests to do so are met.
Hope and change.Steve said:While I was there at the IRS site.. I noticed this gem..
Example 1—child files joint return.
You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. He earned $25,000 for the year. The couple files a joint return. You can’t take an exemption for your daughter.
Example 2—child files joint return only as claim for refund of withheld tax.
Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. They lived with you all year. Neither is required to file a tax return. They don’t have a child. Taxes were taken out of their pay so they filed a joint return only to get a refund of the withheld taxes. The exception to the joint return test applies, so you aren't disqualified from claiming an exemption for each of them just because they file a joint return. You can claim exemptions for each of them if all the other tests to do so are met.
So a spouse of a person who is in the military loses an exemption,.. yet a loser who doesn't do much of anything gets "two" exemptions... Ain't America great!