When you have dependents, knowing how to handle them, in
terms of taxes, can be a little tricky. Basically, you have two choices when it
comes to dependents. You can either include them on your tax return or have
them file their own returns.
What you should do
depends on a lot of different factors, but be aware that, in many cases, it’s
easier and cheaper to simply include them on your return, which you are free to
do providing that the dependent’s income doesn’t go above a certain amount.
Dependent Children
Children are the most commonly claimed dependents. They can
typically be claimed as long as they are related to you in one of the following
ways: child, step-child, brother, sister, brother or sister’s child,
step-sibling, or foster child, or the descendant of one of these people.
In addition to falling into one of these categories,
dependents must have lived in your residence for at least half a tax year, be
under 19 or under 24 if enrolled in school full-time unless permanently
disabled, and they must not have provided over half of their financial support
in the year that they are claimed.
Dependent Relatives
Dependents are not always children. In fact, anyone whom you
live with and support financially or who is related to you and whom you support
qualifies as a dependent. The relative cannot be a qualifying child, as
mentioned above, and must not receive more than $3,950 in yearly income and
must receive over half of his or her financial support from you.
Claiming Rules
As you can see, there are some pretty strict but clear rules
on dependents put in place by the IRS. Other rules that you must abide include
the following:
l You
may not claim dependents who are not 65 or older or blind if their income is
above $6,100
l Do
not file a dependent’s earned income on your taxes
l Dependents
who have unearned income typically have to file their own tax returns,
although, in some cases, a parent may be able to claim a child’s unearned
income.
As you can see, as you get deeper into tax code, the
dependent rules start to get a little trickier. If you’ve got a complex
situation or are afraid of making a mistake when it comes to claiming
dependents, remember that it’s always smart to ask a tax professional for help. #Taxes #DependentsIncome #Naperville