When it comes to taxes, it pays to care for people – each allowance or dependent that you're able to claim lowers the federal income tax that will be withheld from your paycheck (at least if you're filing for years 2017 or before). When April's tax filing season rolls around, each dependent also reduces your overall tax liability, and substantially so – dependent exemption deductions were worth up to $4,150 each prior to 2018. But before you claim dependents on your tax forms, make sure you meet all the eligibility requirements, otherwise you'll be filing a Form 1040X to correct your mistakes down the line.
How to Claim
If you have a dependent, you can claim her as an allowance on your Form W-4. Each allowance or dependent that you claim on your W-4 lowers the federal income tax that will be withheld from your paycheck. At tax time, to reduce your tax liability, you can claim the dependent on Form 1040. When completing the form, put your dependent’s information on the respective line, including her name, Social Security number and relationship to you.
Before you complete your 1040, verify that anyone you claim is truly a dependent. The IRS makes this process painless by offering an easy-to-use "Whom May I Claim as a Dependent?" qualifying relative test that you can use online.
Eligibility and Exceptions
The dependent must meet the Internal Revenue Service’s citizenship, support, gross income, joint return and relationship tests. A child is your dependent if she’s related to you, lives with you, relies on you for financial support and is under the age of 19 – or younger than 24 if she’s a full-time student of at least five months. She must be a citizen or resident of the United States, and no one else should be able to claim her as a dependent. Your relative is a dependent if she lived with you all year or qualifies as a relative who doesn't have to live with you, such as your child, stepchild, foster child, brother, sister or grandparent. You must provide more than half of her total annual support, and no one else can claim her as a dependent.
You cannot claim your spouse as a dependent, but if you're filing jointly, you can claim an exemption for him and yourself, respectively, on your 1040. If you're filing separately, you can claim an exemption for him only if he's not filing a joint return, had no annual gross income and no one else can claim him as a dependent. The exemption amount is the same as if he were a dependent.
If you have a qualifying child under 17, you can likely take the child tax credit, which you can claim by following IRS Form 1040 instructions and checking the appropriate box. Biological children, stepchildren, foster children and adopted children qualify, so long as they are U.S. citizens who have lived with you for more than half of the tax year, and who receive more than half of their financial support from you.
Dependents in Tax Year 2018
Unfortunately for caretakers, tax reform passed in late 2017 eliminates personal and dependent exemption deductions for the year 2018 and forward. Though standard deductions have increased, 2018 tax law simply does not allow for a 1040 dependent.
On the flip side, the tax year in 2018 sees a boost to the Child Tax Credit, which is ow worth up to $2,000 per qualifying child with a refundable amount of up to $1,400 per qualifying child. The credit begins to phase out at the $200,000 income level, or $400,000 if you file jointly.
Dependents in Tax Year 2017
If you're filing for 2017 or 2016, any dependent you claim must have earned less than $4,050 during the tax year.
In 2017, the Child Tax Credit was worth was up $1,000 per qualifying child. It's a nonrefundable credit, so if it exceeds your tax liability, the amount you owe is reduced to zero but you typically won't get the remaining credit as cash. If you complete IRS Form 8812, however, you may be able to claim an additional – and refundable – Child Tax Credit for the unused balance.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.