Filing your tax return can feel unnecessarily complicated, but fortunately, the new Tax Cuts and Jobs Act signed into effect for the 2018 tax year by President Trump makes things a little simpler.
For those who plan on claiming a dependent on their 2018 tax return (which you need to file by April 15, 2019), there are some changes that could impact your family.
Here’s everything you need to know about claiming a dependent for your 2018 taxes.
Who You Can Claim as a Dependent
Any person who you support who is also a qualifying child or qualifying relative can be claimed as a dependent on your taxes.
In order to qualify, the child must be younger than you and younger than 19 by the end of 2018. If the child is a full-time student, they must be younger than 24. Neither of these age restrictions apply if your child is permanently and totally disabled.
A qualifying child must be a son, daughter, foster child, adopted child, or stepchild. You may also claim a descendant of any of these, such as a grandchild. The qualifying child may also be your brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of these, such as your niece. In addition, they must also live with you for more than half the year.
Qualifying Relatives and Other Dependents
In order to be a qualifying relative, all of the above must apply and you must have provided more than half of that person’s support for the entire year.
You can also claim non-relatives as dependents if that person meets certain requirements. For example, the person must live at your house for the entire tax year, your relationship cannot be unlawful, and the person must earn less than $4,150 a year.
In addition, the dependent must not be able to be claimed by another person. If they are, that person must fill out a form waiving their right to claim the dependent which you must then file with your tax return.
How the Tax Reform Affects Families with Dependents
In previous years, families were able to deduct $4,050 per dependent. However, this is not the case for the 2018 tax year.
While you’ll no longer be able to claim the $4,050 per dependent, you’ll now have a larger standard deduction in addition to the Child Tax Credit.
Fortunately, the Child Tax Credit doubled this year to $2,000 with up to $1,400 refundable per child. You’ll still be able to benefit from claiming a dependent even if you won’t be able to deduct $4,050 from your taxable income. Remember, a tax credit is almost always better regardless as you’re able to get a dollar-for-dollar reduction on the taxes you owe.
You can also claim a $500 credit for each dependent you claim who doesn’t qualify for the Child Tax Credit, but it’s important to note that you can’t claim this amount for yourself.
Are You Claiming a Dependent on Your Tax Return?
While claiming a dependent still has its benefits, there are certainly changes for the 2018 tax year that families need to take note of. When filing your tax return, be sure your claim to a dependent is valid!