The IRS doesn't tax you on all of your income. Instead, it allows you to reduce the income on which you pay taxes for any number of reasons. One of the many ways to reduce your tax liability is to have children or other dependents. A dependent could be a child -- including a full time student under age 24 -- or another relative that you support, as defined by the IRS.
Tax Filing Status
Your tax filing status determines the size of your standard deduction, if you claim one, as well as your tax rate. Single people typically file as single and married people can either file jointly or separately. However, if you are unmarried and have dependents, you can also file as a "head of household." Heads of household receive a larger standard deduction and more favorable tax brackets than single people.
The IRS lets you claim an exemption for each person represented on your tax return. If you are single and have no children or dependents, you would get one exemption. If you are single with two children and an elderly parent that depends on you for support, you would get to claim four exemptions -- one for you, one for your parent and two for your two children. For the 2014 tax year, each exemption reduces your income by $3,950. That compares to $3,900 in 2013.
Child Tax Credits
As of the 2014 tax year, the IRS lets you claim a tax credit for every qualifying child that is your dependent. The maximum amount you can claim for the credit is $1,000 for each qualifying child. The credit lets you take whatever you owe in taxes and reduce it by $1,000. You can only claim it on children under 17 as of the end of the year.
Additional Deductions and Credits
If your dependent child is in college, you can claim a credit or deduction to help defray college costs. Adoption expenses can be turned into a tax credit as well. Also, many of your child-care expenses can either be offset with a credit or paid with pre-tax dollars through a program at your job.
- Intuit TurboTax: Rules for Claiming a Dependent on Your Tax Return
- IRS: Publication 501
- Tax Policy Center: Taxation and the Family -- What Is the Personal Exemption?
- Forbes: IRS Announces 2014 Tax Brackets, Standard Deduction Amounts and More
- IRS: Publication 972
- Kiplinger: Deductions and Tax Credits for Children and Dependents
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.