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Dependents and Your Taxes – Understanding in Depth

In the United States, a dependent is defined as a person who is either a qualifying child or a qualifying relative for tax purposes. A dependent allows the taxpayer to claim certain tax benefits, such as exemptions, credits, and deductions, on their tax return.

A qualifying child must meet the following criteria:

  • Age: The child must be under the age of 19, or under the age of 24 if a full-time student.
  • Residency: The child must have lived with the taxpayer for more than half of the tax year.
  • Relationship: The child must be a daughter, son, foster child, stepchild, sister, brother, stepsister, stepbrother or a descendant of any of these individuals.
  • Support: The child must not have provided more than half of their own support during the tax year.

A qualifying relative must meet the following criteria:

  • Residency: The relative must have lived with the taxpayer for the entire tax year.
  • Gross Income: The relative’s gross income must be less than the amount of the exemption for the tax year.
  • Support: The taxpayer need to provide more than half of the relative’s support during the tax year.

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How dependency and tax is related?

In the United States, dependents can have an impact on an individual’s taxes in several ways. Here are a few:

Exemptions:

Taxpayers can claim a personal exemption for themselves and for each of their dependents. This reduces the amount of taxable income and can lower the amount of taxes owed.

Child Tax Credit:

Taxpayers may be eligible for the Child Tax Credit if they have a dependent child under the age of 17. The credit is worth up to $2,000 per qualifying child, and up to $1,400 of the credit may be refundable.

Earned Income Tax Credit (EITC):

Taxpayers who have earned income and who have dependents may be eligible for the EITC. The amount of the credit depends on the taxpayer’s income and number of dependents.

Head of Household Filing Status:

Taxpayers who support a dependent may be eligible to file their taxes as head of household, which can result in a lower tax rate and a higher standard deduction.

Dependent Care Credit:

Taxpayers who pay for child care or dependent care so that they can work or look for work may be eligible for the Dependent Care Credit. The credit is worth up to 35% of eligible expenses, up to a maximum limit.

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