Determining the best strategy for filing your taxes can be complicated. Deciding whether to take the standard deduction or itemize and whether to claim your dependent’s income on your own tax return are just two of many options taxpayers must weigh when filing taxes each year. In certain situations, it may be advantageous to include your dependent’s income on your tax return instead of having them file their own returns. In general, taxpayers can claim a dependent child’s investment income up to a certain threshold. Here is some helpful information on determining whether you should include your dependent’s income on your taxes.
Who Qualifies as a Dependent?
Before you can determine whether to include a dependent on your tax return, you must know who qualifies. Both relatives and children can be considered dependents if they meet certain criteria. For tax purposes, a qualifying child must meet the following eligibility requirements:
They must be under age 19. However, if your child is a full-time student this threshold increases to 24.
They must be your child, stepchild, or foster child.
They must live with you for at least six months of the tax year.
They must not have provided more than half of their own financial support during the tax year.
In addition to children, relatives can also qualify as dependents. Unlike qualifying children, eligible relatives are defined as individuals whom you financially support. Both individuals who live with you and those that don’t can qualify as dependent relatives. Eligible dependent relatives can include siblings, nieces, nephews, aunts, uncles, etc. Additionally, qualifying relatives must have earned less than $4,300 in the 2020 tax year and received more than half of their financial support from you.
These are just a few of the general guidelines the IRS uses to determine dependent eligibility. However, certain tax credits and deductions have specific rules. If you are struggling to determine whether someone qualifies as a dependent, you should consider consulting a tax professional.
Claiming a Dependent on Your Tax Return
When it comes to claiming a dependent, different kinds of dependents will have different parameters. Dependents under the age of 65 who earned more than $12,400 in 2020 will have to file their own return. In general, to file a return for those aged 65 or older, their income levels must be higher.
Additionally, dependents who have earned income in the form of interest, dividends, or capital gains will likely have to file their own tax return. For example, for the 2020 tax year, if this income surpassed $1,100, dependents would have to file their own return.
As a taxpayer, it can be difficult to navigate the rules surrounding dependents. If you are struggling to decide whether to claim a dependent’s income on your taxes, it can be beneficial to work with a skilled tax professional. An experienced tax professional can look at your finances and advise you on the best strategy for your situation.
Choose Morgan Sebastian for Help With Your Taxes
If you are struggling to determine if you should claim a dependent on your taxes, it can be beneficial to seek help from a skilled tax professional. At Morgan Sebastian Law, Attorney Becky Sebastian is eager to help you navigate the complexities of your filing your taxes. As a trusted tax resolution lawyer, Attorney Becky Sebastian has years of experience representing business owners and individuals who are experiencing tax audits, wage garnishment, and other tax-related issues. She can provide you with the professionalism and peace of mind you deserve when dealing with the IRS.