This Blog will explain the Dependent deduction choices that are available to Taxpayers for the 2018 Tax Year. Dependents are listed on the Top Half of the new “1040 Simplified” tax form.
A Dependent is an IRS tax definition that means a Qualifying Child, a Qualifying Relative, or an Other Dependent. The Dependents you claim on your tax return are listed in the middle Top Half of the new “1040 Simplified” tax form. If you list more than two Dependents, the tax software will list them on a second page.
The IRS has tests each Dependent must meet – to qualify to be listed as your Dependent on the tax return. See below.
This link for Publication 501-Exemptions, Standard Deduction & Filing Information gives the IRS definitions and explanations for:
- Filing Status
- Filing Requirements
- Definitions of Dependents
- Personal and Dependent Exemptions (Obsolete for the 2018 Tax Year)
- Standard Deduction
It is a terrific resource for the IRS explanations for Dependents. I will update the link, when the IRS releases the 2018 version of the publication.
Qualifying Children are defined by five IRS tests they have to meet. If the Child you are attempting to claim as a Dependent on your tax return meets all (5) of these tests – then you can claim them, listed as a Qualifying Child on your tax return.
- Relationship to you, the taxpayer claiming them as a Dependent
- Son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendent of any of them, for example your grandchild, niece or nephew
- Age on December 31st of the tax year
- Under age 19 at the end of the tax year and younger than you, or your spouse if filing jointly
- Under age 24 at the end of the tax year, a student, and younger than you, or your spouse if filing jointly. A student is your Child who during any part of 5 calendar months of the tax year, was enrolled as a full-time student at a qualified school.
- Support provided by the Child
- The Child cannot provide over half of his/her support during the tax year. Support is generally defined as living expenses.
- The Child must have lived with you, for more than half of the year. This includes “temporary absences” like attending college, as long as the student’s belongings and permanent residence is still with you.
- Joint Filing
- The Child you are claiming as a Dependent, cannot file a Joint tax return with their spouse, except for one exception. That Child can only file a Joint tax return with their spouse, to claim a refund of withheld tax.
Qualifying Relatives are defined by four IRS tests they have to meet. If the Person you are attempting to claim as a Dependent on your tax return meets all (4) of these tests – then you can claim them, listed as a Qualifying Relative on your tax return.
- Not a Qualifying Child of you or any other taxpayer
- The person you are attempting to claim as a Qualifying Relative, cannot satisfy all the tests as a Qualifying Child of any other taxpayer, including yourself – even if you or another taxpayer do not claim them.
- Relationship to you, the taxpayer claiming them as a Dependent
- Son, daughter, stepchild, foster child, or a descendent of any of them, for example your grandchild
- Brother, sister, half sister, or a son or daughter of any of them, for example your niece or nephew
- Father, mother, or ancestor or sibling of either of them, for example your grandmother, grandfather, aunt or uncle
- Stepbrother, stepsister, stepmother, stepfather, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, sister-in-law
- Any other person (other than your spouse) who lived with you for the entire 12-months of the year, as a member of your household.
- Gross Income test
- The taxable income of the Qualifying Relative must be below the Maximum Income Amount for the tax year. It is $4,150 for the 2018 tax year. This amount typically increases each year for inflation. Some income like Social Security Benefits, does not count towards this Gross Income test. The IRS gives clear instructions what income to include.
- Support test
- You must provide over half of the person’s support. Support is generally defined as living expenses. The IRS provides worksheets to help properly determine if you indeed provided more than 50% of the Support for this Qualifying Relative you are attempting to claim.
Most of the relatives listed above in the Relationship category, do not have to live with you the entire year – to still be listed as your Qualifying Relative. They must live with you for over six months of the year.
Your parents can even live separately from you, as long as you provide over 50% of their support. You can therefore claim them as Qualifying Relatives, provided they also meet the other tests.
Only an Other Dependent that is not defined as your relative from the lists above – must live in your household for the entire year. For example, your Cousin or other distant relative, your Girlfriend, Boyfriend and their children, or Friend.
See page 19 of the Publication 501-Exemptions, Standard Deduction & Filing Information for the list of “Relatives who don’t have to live with you the entire tax year” in your household – to still qualify them as one of your Qualifying Relative dependents.
Dependent Related Credits:
If your Qualifying Child is under the age of 17, at the end of the 2018 tax year, you might qualify for the $2,000 Child Tax Credit. Up to $1,400 of this credit can be refundable to you, under the Additional Child Tax Credit. This credit is available for taxpayers with Adjusted Gross Incomes below $400,000 for a Married Filing Jointly couple, and below $200,000 for all other taxpayers using a filing status other than Married Filing Jointly.
A new nonrefundable credit is available for each Dependent, who does not qualify for the Child Tax Credit. This is a new $500 credit called the Family Credit. The same income levels apply for this credit, as listed above.
Click the link below for the next Blog post to learn about the Income categories reported to the new form “1040 Simplified”.
Feel free to send me an email at Mike@TaxesAreEasy.com
Blog Written Content ©2018 Michael D Meyer. All rights reserved.
PDF IRS forms, instructions & publications – ©2018 Department of the Treasury Internal Revenue Service IRS.gov
Legal Disclaimer: Nothing written or expressed in this Blog shall be construed as legal, accounting, or tax advice. This Blog is for informational purposes only, to inform Individuals about the IRS tax forms required to file an individual tax return, and the instructions that accompany such IRS tax forms.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any tax transaction or filing any tax form.