"Dependents" are Not Always Easy to Identify
Author: Jenny Shilling
Defining the concept of a dependent for tax purposes was much less complicated in the 1950s and '60s. It used to be simple to identify dependents -- in most cases, parents claimed their children.
It's a different world in 2012. With today's multi-generational, non-nuclear families, figuring out how many people to claim is more complicated. We have a wider variety of related and unrelated people living together than we did just a couple of generations ago.
Specifically, it's more common to see scenarios like:
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Half brothers/sisters and their descendants
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Adults caring for aging parents
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Foster children
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Stepchildren
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Other kinds of legitimate dependencies
Having a dependent allows you to reduce your taxes by claiming an exemption. If you are single, it can further reduce your taxes by allowing you to claim head of household filing status.
According to the IRS, a dependent is a person with whom you have a relationship and who meets certain tests. To be a qualifying child, the individual must:
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Live with you for at least half of the year
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Get at least half of their support from you
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Be unmarried and filing jointly
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Be either under 19 (or under 24 and a student)
A qualifying relative, on the other hand, is someone who cannot be claimed as a qualifying child, lives with you, has $3,700 or less in income and is supported by you. Brothers and sisters also count as dependents if they meet either the qualifying child or relative tests.
Finally, any child who is "permanently and totally disabled," according to the IRS, qualifies as a dependent.
If someone meets the test to be a dependent, you can claim him or her as an exemption on your tax return. And in the 2011 tax year, each exemption will reduce your taxable income by $3,700. That sizable bite out of your tax obligation makes it worth your time to clearly understand who you can claim.
At The Tax Office, we can help you clarify the dependent relationships in your life for tax purposes. Contact us today, and our expert staff of accounting and tax professionals will handle all of your tax preparation and planning needs.
