On the first page of your Form 1040 on the grid-like formatting under the personal information section is the area where you articulate your dependents. Within the last couple years, the tax benefit received for claiming dependents on your return has changed fundamentally. Let’s jump in so you can understand how these changes affect your bottom line.
First, there are two types of dependents, qualifying children and other dependents. These have differing tax credit amounts assigned to them, with the child tax credit up to $2,000 for each qualifying child, and the credit for other dependents up to $500 for each dependent that is not a qualifying child.
To be a taxpayer’s qualifying child, the person claimed as a dependent must be the taxpayer’s child, stepchild, foster child, sibling, step sibling, half sibling, or a descendent of any of the aforementioned. Furthermore the child must be under 17 at the end of the tax year, so if he or she turns 17 during the tax year, then you can’t claim him or her as a qualifying child. Furthermore, the person must have provided less than half of his or her own support, meaning that you or your spouse, if filing jointly, provided over half of the support for the child during the tax year.
Additionally, the child must have lived in your household for over half the tax year, but this rule does not apply to a newborn baby, who qualifies as long as he or she has lived with his or her parents since leaving the hospital. Also, if you are divorced and your child does not live with you, then you are able to claim the child as long as your ex-spouse who is the custodial parent agrees to allow you to claim that child for a given tax year.
Furthermore, you must claim the child on your return. The child must not have filed a joint return with his or her spouse (this one is a far-fetched scenario – a married minor under 17 that has the income to file a joint return with his or her spouse, but hey, this is America, there are a lot of us). Finally, the child must be a U.S. citizen or resident alien. Note that an adopted child is treated the same as the taxpayer’s biological child.
As for other dependents, if you have a person in your life for which you have provided support during the tax year, whether or not that person is your child, and regardless of whether that person is over 17, you may be able to receive a tax credit by claiming them. This is the tax credit for other dependents.
To claim a dependent other than a qualifying child, that person must be: claimed on the return, cannot be the source of the child tax credit; and must be a U.S. citizen or resident alien. Also, for tax year 2019, these other dependents had to have gross income of less than $4,200, unless that person was permanently or totally disabled.
The limiting factor on the child tax credit and the credit for other dependents is either the amount of your income tax or the amount of income earned. If your total income tax on line 12b of Form 1040 is less than the upper limit of the credit, then you cannot take the full credit, and if your income tax incidence is $0, you can’t take the credit at all. However, under either of these scenarios, you may be able to take the additional child tax credit, but only if you have a qualifying child. In terms of an upper limit, if your modified adjusted gross income is either $200,000 for single filers or $400,000 for jointly filing married couples, the child tax credit or credit for other dependents might be reduced or eliminated.
In figuring your modified adjusted gross income, the following amounts are included: your adjusted gross income, found on Form 1040, line 8b; lines 45 through 50 on Form 2555, Foreign Earned Income; line 15, Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Other than adjusted gross income on line 8b, these categories generally don’t apply, so modified adjusted gross income will equal adjusted gross income for most people.
To figure the child tax credit or credit for other dependents, use the Child Tax Credit and Credit for Other Dependents Worksheet found in the instructions for Form 1040 or IRS Publication 972, Child Tax Credit and Credit for Other Dependents.
If you are not eligible for the full amount of the child tax credit due to your total income tax on line 12b being less than the upper limit of the credit for the sum of all your qualifying children, then you might be eligible for the additional child tax credit, which is refundable. In this vein, figure the additional child credit using Schedule 8812.
There are a few other things to go over before this article ends. The first is that you don’t have to include a separate form for the child tax credit or credit for other dependents. Once these credits are figured they are included on line 13a of Form 1040 directly. However, the additional child tax credit does require another schedule to be included with your return, which is Schedule 8812. Also, remember that to claim a dependent, you must list his or her name, social security number, and indicate your relationship to the person, in the “Dependents” section of the first page of Form 1040. Finally, other dependents that are not qualifying children can be any age and any relation to you, including no relation; they just have to live with you and satisfy the other requirements for dependency.
For more information on dependents and their tax credits, see IRS Publication 972, or the instructions for Form 1040.
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