Who Qualifies as a Dependent?
You can claim someone as a dependent if you provide at least 50% of their financial support during the year. They can only be claimed as a dependent by one taxpayer in any given year. You can’t claim a dependent if someone else claims you as a dependent. And in most situations, you can’t claim a dependent who’s married and files a joint return with a spouse.
Head-of-Household Filing Status
Qualifying as head of household entitles you to a larger standard deduction than you would receive if you filed a single return: $19,400 versus the $12,950 that single filers can claim as of tax year 2022. For 2023, the standard deduction for head of household is $20,800 and for single filers, it’s only $13,850. (the return you file in 2022).
Claiming this filing status requires that you have at least one dependent. Claiming one can shave $6,450, the difference between the single and head-of-household standard deductions, off your 2022 taxable income. You also get to earn more income before climbing into a higher tax bracket.
The Child Tax Credit and Credit for Other Dependents
Tax credits are better than tax deductions for most people with lower and middle incomes, and the child tax credit is one of the best available. Deductions can only subtract from your taxable income, but credits are deducted from what you actually owe the IRS. Some credits are even refundable, so the IRS will send you a check when and if the credit you qualify for exceeds your tax liability. But you’ll need at least one child dependent to qualify for these credits.
The Child Tax Credit
The child tax credit gives taxpayers a break for each qualifying dependent child. The American Rescue Plan Act increased the credit for tax year 2021, but for 2022 and 2023, it goes back to its prior level: $2,000. Of that, $1,500 is refundable in 2022 and $1,600 is refundable in 2023.
The Credit for Other Dependents
You can also claim a tax credit for other dependents who don’t qualify for the child tax credit, including those over 18. This could include parents, other relatives, or dependents not related to you. This credit is only worth $500, but that’s at least some noteworthy amount. Most of the qualifying rules are the same as for the child tax credit, except adult dependents don’t have to have valid Social Security numbers. Instead, they could have an individual taxpayer identification number (ITIN) or adoption taxpayer identification number (ATIN). Unfortunately, though, the $500 credit for other dependents isn’t refundable, so the most it can do is shave that amount off your tax bill for each qualifying dependent.
The Child and Dependent Care Credit
The child and dependent care credit is a nonrefundable tax credit that may help you pay for the care of eligible children and other qualifying dependents. This credit equals up to 50% of what you spend on care so you can go to work or leave home to look for a job. The exact percentage depends on your income and how many child dependents you have who need care. You can claim up $8,000 in care costs if you have one dependent, or $16,000 if you have two or more dependents. (Since only half of that money goes into the credit, the maximum you can receive is $4,000 for one dependent and $8,000 for two or more.) Your dependents must be under age 13—young enough to require supervisory care while you’re away from home—or be someone incapable of self-care who lives with you more than half a year. If you pay an individual rather than a day camp or child care center, that person cannot be your spouse, the child’s parent, or another one of your dependents. You—and your spouse if you’re married and file a joint return—must have earned income to qualify. You generally also can’t claim this credit if you’re married but file a separate return, but some exceptions apply if you don’t live with your spouse. You can only include costs not paid for or reimbursed by your employer.
The Earned Income Tax Credit
You can claim the earned income tax credit (EITC) even if you don’t have a dependent child, but it’s worth a lot more money if you do have one or more. This credit aims to put dollars back into the pockets of lower-income families and is also refundable. You must have earned income to qualify but not too much. Unearned income from investments is capped at $10,300 for the 2022 tax year, the return you’ll file in 2023. The size of your credit will depend on your adjusted gross income and the number of dependents you have. Here are the maximum AGIs you can have to qualify, and the amount of the credit you may be eligible for.
Education Tax Credits
Two popular education tax credits are available as well: the lifetime learning credit (LLC) and the American opportunity credit (AOC). You can claim either one of them—but not both for the same student or same qualified expenses—you spend on qualifying education expenses for yourself, for your spouse, or your dependents. The student must be in the first four years of college to qualify for the AOC, but the lifetime learning credit (LLC) doesn’t share this restriction. The maximum AOC is $2,500 per student for the first $4,000 you spend for each student. Up to 40% of that is refundable (up to $1,000). The LLC is worth 20% of the first $10,000 you pay in tuition and fees annually, capped at $2,000 per tax return. Your dependents will also help qualify you for an education-related tax deduction. The student loan interest deduction is worth up to $2,500 in interest you paid on qualified student loans over the course of the year for yourself, your spouse, or your dependents. You don’t have to itemize your deductions to claim this one. It’s an above-the-line adjustment to income.
The Medical Expense Deduction
Your dependents’ expenses can also contribute to the medical expense deduction if you decide to itemize on your tax return. You can claim a deduction for the portion of expenses, including many health insurance premiums, paid for yourself, your spouse, and your dependents that exceed 7.5% of your AGI. IRS. “Rev. Proc. 2022-38,” Page 9.
