The term Tax Dependent refers to a person who is eligible to be claimed as a dependent on someone else’s tax return. The person claiming the dependency may be eligible for certain tax benefits, such as a tax credit or deduction.
Who is a Tax Dependent?
A tax dependent is someone who is eligible to be claimed by someone else on tax return. The person claiming the dependent is responsible for financial support for them, and as a result, eligible for benefits. For tax purposes, a dependent is typically a qualifying child or a qualifying relative. To be considered a tax dependent, the person must meet specific criteria related to residency, support and income among others.
Categories of a Tax Dependent
There are two main categories of individuals who can be claimed as tax dependents: Qualifying children and Qualifying relatives.
To be considered a qualifying child for tax purposes, the individual must meet the following criteria:
- Must be under 19 (or under 24 if a full-time student).
- Must have lived with the taxpayer for over half of the tax year.
- Must not provide over half of their own support during the tax year.
- Must be a US citizen, US national, US resident alien or a resident of Canada or Mexico for some part of the tax year.
To be considered a qualifying relative for tax purposes, the individual must meet the following criteria:
- Must be a relative of the taxpayer, such as a parent, sibling, grandparent or cousin.
- Must have gross income less than the exemption amount for the tax year.
- Must not have provided over half of their own support during the tax year.
- Must be a US citizen, US. national, US resident alien or a resident of Canada or Mexico for some part of the tax year.
Rules for Claiming Tax Dependent
The rules for claiming a tax dependent vary depending on the individual’s specific circumstances, but some common rules include:
- Maximum number of Dependents: There is a limit to the number of dependents that can be claimed. The maximum number varies depending on the tax year and the specific tax benefits being claimed.
- Tiebreaker rules for Multiple Claimants: If multiple individuals can claim the same dependent, the IRS has tiebreaker rules that determine who is entitled to this claim.
- Special rules for Divorced or Separated Parents: For divorced or separated parents, the custodial parent (the parent with whom the child lived for the greater number of nights during the tax year) is typically entitled to claim the child as a dependent. However, there are specific rules that apply in cases where the custodial parent waives their right to claim the child.
- Dependents with Social Security Numbers: To make the claim, the individual must have a valid Social Security number (SSN) or Individual Tax Identification Number (ITIN). The taxpayer must provide the dependent’s SSN or ITIN when filing their tax return.
Documents required for Claiming a Tax Dependent
The documents required for claiming a tax dependent depend on the specific circumstances of the taxpayer. However, some common documents that may be required include:
Social Security Number (SSN) or Individual Tax Identification Number (ITIN)
In order to claim a tax dependent, a valid SSN or ITIN is required. The taxpayer must specify the dependent’s SSN/ITIN when filing a tax return.
Proof of Residency
The dependent must have lived with the taxpayer for over six months in order to qualify. Proof of residency includes documents like a lease agreement or utility bill in the taxpayer’s name and the dependent’s name.
Proof of Financial Support
The taxpayer must provide more than half of the dependent’s support during the tax year in order to be eligible. This may include documentation such as bank statements, pay stubs or receipts for expenses incurred on behalf of the dependent.
Divorce Decree or Separation Agreement
In cases of divorced or separated parents, the custodial parent is typically entitled to claim the child as a dependent. A copy of the divorce decree or separation agreement may be required to verify the custodial parent’s entitlement to claim the child.
Other Supporting Documents
Depending on the specific circumstances of the dependent and the taxpayer, other supporting documentation may be required such as proof of the dependent’s age, proof of student status (for qualifying children who are full-time students), proof of citizenship and/or residency status.
In conclusion, claiming a tax dependent can provide significant tax benefits, including increased tax exemptions and credits. However, it’s important to understand and follow the rules and requirements for claiming a tax dependent, including the eligibility criteria, documentation requirements and any special rules that may apply.
Proper documentation and record-keeping are crucial to support the claim in case of an IRS audit. Seeking the guidance of a tax professional can be helpful in ensuring that all rules and requirements are met and that the taxpayer maximizes their tax benefits.