How many dependents should I claim?

Filing your taxes can be rewarding if you understand all the benefits you can benefit from, especially if you are one of the lucky taxpayers who can claim dependents. Every dependent you claim is a sure way to lower your taxes, as long as you understand who gets the green light on your tax return. The rules can be a bit cumbersome, but you need to pay attention to them all, because the people you least expect can be dependent and save thousands of dollars.

What you need to know about dependents

In a nutshell, a dependent is someone who supports you. Prior to the implementation of the 2017 Tax Cuts & Jobs Act, you could receive a personal exemption for the claim of dependents, allowing you to earn $ 4050 for each person on your return in 2017. These personal releases have been suspended from 2018 to 2025 in favor of standard deduction amounts that are almost double what they were before.

Your goal now is to identify all the dependents you can claim on your tax return and then determine if they can qualify you for tax bonuses, including these:

1. Child tax credit (up to $ 2,000 per qualifying child under 17).
2. Additional child tax credit (up to $ 1400 repayable credit per qualifying child).
3. Earnings income tax credit (refundable tax credit for up to three dependents).
4. Child and dependent care credit (claim credit for qualifying expenses paid for children under 13).
5. Credit for other dependents (non-refundable credit worth $ 500 for dependents who are not eligible for child tax credit).
6. Household principal (an increase in the standard deduction amount above the single submission status).

Do not worry. Once you break it all down or use the IRS free tax returns, you will not let your wheels turn. To get started, make sure the dependent has a taxpayer identification number (ie a social security number, an individual taxpayer identification number or a taxpayer identification number). You need this information to qualify for benefits.

Who qualifies as a dependent?

There are two categories of dependents: qualifying child and qualifying family member. The big prize is being able to claim someone as a qualifying child, as it gives you the chance to earn more credits on your tax return.

Here is a summary of the qualifications, but keep in mind that there are exceptions in the tax code, so do not be afraid to refer to IRS publication 501 for more details.

To pass the qualifying child test, you must tick the box for these five requirements:

1. Age: Your child must be younger than you and younger than 19 years. If the child is between 19 and 24 years old, they must be a full-time student for five calendar months of the year. Individuals who are “permanently and totally disabled” can qualify at any age.
2. Hostel: The child must live with you for more than six months of the year (unless the child was born or died within the tax year).
3. Relationship: The person must be related to you as your child, stepchild, foster child, adopted child, brother or sister, stepbrother or a descendant of one of these.
4. Support: The child may not provide more than half of his or her support for the year.
5. Joint return: The child can usually not be claimed if they are married and submit a joint return to their spouse for the year.

On the other hand, the claim to qualifying relative status has a slightly different set of rules that you need to know:

1. Qualifying child: The person cannot be considered your qualifying child or another taxpayer’s child.
2. Relationship: The person must live with you all year round as a member of your household or family member (aunts, uncles, grandparents, stepparents, etc.).
3. Gross income: The person claimed earned less than $ 4,300 in 2021 (same as in 2020).
4. Support: You should provide more than half of the person’s support for the year.

Do not limit your dependents

It is easy to write off someone who is not a family member as a dependent. But you can miss out on valuable tax savings if you do not follow the rules.

For example, most people do not think about claiming their partner, best friend, non-blood relative, boyfriend or girlfriend as a dependent on their tax return. But you can add those individuals among the qualifying family member to your list if they meet the four rules.

Be rewarded for your support

Do not fail to claim dependents if they qualify. You can automatically lower your taxable income and be on track for other benefits on your tax return.

The best part is that there is no limit to the number of dependents you can claim. As long as all the subjects are, you can position yourself to save thousands of dollars when you file taxes.