Who Are Your Dependents?
October 08, 2018 in Tax Planning
Naturally, the best-case scenario when filing taxes is that, rather than owing the IRS, the IRS owes you. There are countless tax documents the go into the filing of some people’s taxes, and they can take hours to sort and go over. But in addition to profit and loss statements and W-2s, there’s something that can provide valuable information where your taxes are concerned. It’s your household.
More specifically: do you have dependents? People automatically dismiss this if they don’t have someone sitting right in their house that they think might qualify as a dependent. This is why, especially when it comes to tax returns, you need to educate yourself on exactly who your dependents are.
Do My Dependents Have To Be Related to Me?
The short answer here is, no they do not. People automatically think “my kids” when referring to dependents. The correct way to describe this category, however, is “qualifying child”. So, included in this category are grandchildren and children who:
- For over half their support, relied on you…
- Are under the age of 19…
- For over half the year, lives with you…
- And… Does not file a joint return, if they are married, unless it’s just to get a tax credit.
Also falling into this category are stepchildren and adopted children, and descendants and siblings of both.
There Is Also A “Qualifying Relative” Category
This is a broader, second category of dependent. No actual familial relationship is required. A qualifying relative can be anyone who:
- For more than half their support, relied on the taxpayer…
- Made less than the current exemption amount (check with the appropriate year’s regulations) …
- Lives, all year long, with the taxpayer…
- And… Does not count, for a different taxpayer, as a qualifying child.
Between the qualifying relative and qualifying child categories, there are important distinctions. The qualifying relative:
- Has a gross income test
- Has no age test
Does a Dependent Have To Live with Me?
Just how long a dependent as to live with you is outlined by the above information. There are, however, exceptions:
- The qualifying relative does not need to be a member of the taxpayer’s residence if they are parents or siblings directly related through marriage or are children who exceed the age test.
- For the qualifying child category, the traditional residency test can be dismissed if, during any five months of the year, the qualifying child is a full-time student. This circumstance also increases the age test to being under 25 years of age (from being under 19).
Can a Dependent Have an Income?
If a person has their own income, they may still qualify as a dependent. The type of income received by that person and the type of dependent they are will be determining information needed in order for you to apply the gross income test correctly. To accomplish this, you will need to know the current exemptions for the applicable year.
For the most part, the gross income test concerns less the qualifying child dependent, and more the qualifying relative category. A gross income test is not required by a qualifying child dependent. A reputable tax preparer can assist you in this department.
If you have a question about dependents you may have claimed on your taxes, or are having issues with the IRS, your best bet is to seek the help of a professional. At Tax Defense Partners, we have assisted thousands of individuals with their tax and IRS related problems. Contact us today to see how we can be of assistance to you.