Dependent Tax Credits Can Help You Remove Ordinary Day-To-Day E

  • Claiming dependents can help you save thousands of dollars on your taxes. Yet many people are not aware of who in their family may qualify as their dependent. 

    If you have a family, you need to know how the IRS defines dependents for income tax purposes. This is because it could save you thousands of dollars on your taxes. For tax years prior to 2018, every qualified dependent you claim, you reduce your taxable income by the exemption amount, equal to $4,050. This can add up to substantial savings on your tax bill. For tax years after 2017, dependent exemptions have been replaced by an increased standard deduction and by a large child tax credit or a new child care and dependent tax credit.

    Dependent deduction rules also apply to other benefits, such as tax credits. Many of these credits are available only if you have qualified dependents. The child tax credit, dependent credit, and the earned income tax credit rely on these rules.

    In addition, the rules help you determine if you can write off dependent daycare expenses, medical expenses, various itemized deductions and most tax credits that involve children or family issues. Qualifying for these benefits can spell the difference between owing money and receiving a refund.

    The IRS rules for qualifying dependents cover just about every conceivable situation, from housekeepers to emancipated offspring. Fortunately, most people live simpler lives. The basic rules will cover almost everyone and they aren’t complicated.

    The two types of dependents are a qualifying child and a qualifying relative. Each is subject to different rules. For both types of dependents, you’ll need to answer some questions to determine if you can claim them.

    To find and calculate dependent and child tax credits, a good option is to use the child and dependents tax credit finder/calculator. It asks some basic questions about your dependents and will let you know if you can claim them on your tax return. You’ll also have a good idea of how much you can qualify for.

    One of the most valuable tax benefits you can claim is the dependent tax deduction. It can also potentially lead to even more tax credits, depending on your specific situation. It’s better to use online tax filing software when filing your taxes because all you need to do is enter some basic information and then you’ll be able to find out if you have any qualifying dependents and how you can claim them.