Do you have people that you support? Do you know that if you meet certain tests, they may be claimed as your dependent. Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com.
Today, we will talk about how to maximize your dependency deductions.
Here are 3 things you need to know, number 1: Deductions and income limitation.
Each dependent will reduce your income by $4,000 on your 2015 tax return. However, you might lose part of that deduction if your income is more than $309K if you are married or more than $258K if you are single filer.
Number 2: Who can be considered a dependent? A dependent is someone you provided more than half of their support; more than 50%. And they are either a qualifying child or a qualifying relative. You need to take advantage of both classifications in order to claim the deduction.
A qualifying child is someone related to you, lived with you, under 19 or a full-time student under 24 or it can be any age if permanently disabled
A qualifying relative is a dependent that either lives with you all year or related to you and they must have income that is less than $4,000.
So you can claim any person not related to you as long as they live with you the entire year and made less than $4,000. While any person related to you like your parents or children does not necessarily be living with you, you just need to provide more than 50% of their support and their income needs to be less than $4,000.
Keep in mind that for your parents that receive social security benefits only, those benefits will be taxed as “0” and would not be considered as income. Make sure you take advantage of both classifications in order to claim the deduction.
Okay. We’re almost on the finish line, here’s number 3: Who can’t be claimed
We’ll, your spouse is never your dependent. In addition, you cannot claim a married person if that person files a joint return with a spouse. Also, a dependent must be a U.S. citizen, resident alien, a resident of Canada or Mexico for part of the year.
Wow! You made it!
For a somewhat simple topic, claiming the deduction for a dependent can be quite complex.
You will want to get it right though, because being able to claim someone as a dependent can lead to other tax benefits, including head of the household filing status, child tax credit, education credits, and the dependent care credit.
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Until then, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.com