Every year, you likely pay hundreds, if not thousands of dollars in taxes. Armed with the right information, you can reduce the amount that you pay out and make some considerable savings. Determine who your dependents may be, as you will find that you can claim them on your tax return and lower your tax bill.
For every single one of your dependents, you are able to take an exemption on your taxes. There are two categories of dependents that can qualify, these being your 1. children and 2. your “qualifying” relatives (which might not have to be a blood relative at all). By 2015, each dependent that qualifies allows you to cut down your taxable income by $4000.
In addition, your dependents can earn you some tax credits, and also enable you to write off a number of your expenses. In order to qualify for the exemptions, each dependent has to pass through several tests.
Qualifying Tests for a Child
For a child to qualify as a dependent, there are five tests that must be receive positive results. There are as follows: –
Your Relationship – The child may be your son, daughter, step or foster child or direct descendant. Other children would include your brother, sister, half siblings, step siblings or their descendants. Adopted children and foster children can also count as dependents.
Correct Age – The child should be below the age of 19 by years end, and also younger than you. If the child is a student, they should be below the age of 24 and younger than you. If they have a permanent disability, they qualify at any age.
Living Arrangements – The child needs to have lived with you for 50% or more of the year.
Financial Support – The child should not have availed in excess of half their own support during the year.
Joint Return – The child should not file a joint return for that year.