Save money by knowing your Tax Benefits for your Dependents
If you are a citizen in the US or you are paying tax in the US, you can be able to save a lot of money by claiming dependents on your payable taxes. If you are having children and other qualifying dependents that can be used to claim tax benefits, then you are saving a lot of money.Save money by knowing your tax benefits for your dependents.According to the tax laws in the US in the earlier times, for every qualifying dependent, you are qualifying to reduce your income which is taxable by $4050.
The major purpose behind this is significant savings and if you are successful in claiming multiple dependents those savings get accumulated and in turn, you save a good amount on taxes.
By claiming dependents, the scope for other credits such as Earned Income Tax Credit, Child Tax Credit, etc. arises which can be quite beneficial for you. However, the law for the reduction of taxable income by $4050 for every qualifying dependent is not valid since 2018. But there are a number of tax benefits which you can still claim for your qualifying dependents.
Who is a qualifying dependent for the tax benefit in the US?
There are two qualifying categories of dependents who qualify for being used to claim tax benefits. Both the dependents should satisfy the below-mentioned criteria for being able to be used to claim tax benefits.
- The dependent must be a citizen of US, US resident, US national or a Canadian or Mexican resident.
- You are not permitted to claim a dependent that is opting for a personal exemption for him and is claiming another dependent on his own tax form.
- You are also not permitted to claim a dependent that is married and is himself filing a joint tax return.
Your qualifying children
- You can claim tax deductions for your own children, your siblings or even your grandchildren as your qualifying dependents.
- The child whom you are claiming should be below the age of 19 and should have lived with you for more than half a year.
- The child should not be able to provide more than half of his own support and you should be the only person claiming him.
Your qualifying relative
You must be the only person claiming your relative and you must be providing more than half of the financial support for your relative in a year.
The taxable income of relatives must not be more than $4050.
Let us have a look at some of the tax benefits which you can claim for your dependent children and relatives.
Child Tax Credit
If you have a child who is below the age of 17 years, then you have a child tax credit of $2000 to be earned as a tax deduction. Married parents who are filing joint returns can claim this credit if their income threshold is $400,000. If you are a single parent then your income threshold has to be $200,000 for being eligible to claim this credit.
Child and Dependent Care Credit
In the US, childcare is expensive in nature and if you are paying for the childcare of your dependent children i.e. who are below 13 years of age, then you are eligible to claim Child and Dependent Care credit. This credit here can be defined as a reduction in your payable tax expressed in dollar-to-dollar terms. This credit would range from 20% to 35% of the expenditure incurred by you for childcare and this percentage will depend on your income.
Earned Income Tax Credit
This is an additional credit which can be availed by you if you are claiming your dependents. This tax credit can be availed by you in case of your self-employment income or wages are lower than a particular income level. This tax credit will depend upon another factor i.e. the number of qualifying kids you have.
Tax Credit for dependent relatives
You are eligible to claim a tax credit for those qualifying relatives who are dependent on you. This tax credit is non-refundable in nature and you can claim up to $500 for each qualifying dependent.
Hence, deductions on the qualifying dependents are an excellent tax-saving option in the US. By these deductions, you can save a good amount of money and also can get back the tax refunds if any.