It’s not surprising that Tax Reform has muddied the waters for Tax Year 2018, especially since personal exemptions were suspended this year. What has been surprising is that lately the TaxAct® Professional Customer Support Center has received questions from Tax Professionals asking how to determine whether or not a client of theirs can claim someone as a dependent. Fortunately, the IRS offers an Interactive Tax Assistant (ITA) tool on their website that, along with answering other questions, includes a set of tests to determine who can and cannot claim be claimed as a dependent on a tax return.
There are key items that Tax Preparers should keep in mind when preparing returns that deal with claiming dependents:
Defining dependents
A dependent is either a child or a qualifying relative who meets a set of tests. To be considered a qualifying relative, an individual must meet all four of these requirements:
- Not a Qualifying Child: Cannot be a taxpayer’s Qualifying Child and cannot be someone else’s Qualifying Child.
- Relationship: Must have either lived with you for the entire year as a member of the household or be related to you in one of the following ways: children, stepchildren, grandchildren, or descendants of one of your children (or stepchildren or foster children); parents, grandparents; in-laws (son, daughter, brother, sister, father, mother); siblings including half-brother or half-sister; stepparents, stepchildren, stepsiblings; related-by-blood relatives such as aunt, uncle, niece, or nephew.
- Gross Income: Must have made less than $4,150 in gross income during 2018.
- Support: More than half of the individual’s total support during the year must have been provided by the taxpayer.
The IRS ITA can help you determine if an individual can be claimed as a dependent.
Dependents cannot claim dependents
Taxpayers can’t claim any dependents if someone can claim the taxpayer or their spouse if filing jointly, as a dependent.
Dependents may have to file a tax return
Factors such as total income, married or single, and what taxes are owed will determine whether a dependent must file a tax return.
Child Tax Credit
Taxpayers may be able to claim a Child Tax Credit for qualifying children who are under the age of 17 at the end of 2018, if the taxpayer claims the child as a dependent.
Credit for other dependents
Taxpayers may be able to claim credit for qualifying relatives and children who don’t qualify for the Child Tax Credit.
The IRS has provided an abundance of information to help people as they prepare for April 15 and beyond, including FAQs, searchable Forms, Instructions &Publications, and several other online tools and resources.