While the IRS offers the Child Tax Credit and Additional Child Tax Credit for children and other qualifying relatives who meet strict requirements, taxpayers can claim the Credit for Other Dependents in other situations. You might benefit from claiming this tax break for a stepchild, parent, unrelated individual or another qualifying dependent for whom you provide substantial support. As long as you don't exceed the income threshold and your dependent passes all the tests, you could reduce your tax liability by up to $500 per dependent.
Consider also: Take It or Leave It? Child Tax Credit Payments
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Looking at IRS Dependent Requirements
To get the Credit for Other Dependents, you first need to check whether the IRS considers this person a dependent for tax purposes. Also, you'll need to make sure that the Additional Child Tax Credit or Child Tax Credit doesn't apply to them instead. While IRS Publication 501 lists all the details, there are some basic requirements the dependent must meet:
- They must be a U.S. citizen or have legal U.S. resident status.
- They need an individual taxpayer identification number (ITIN) or Social Security number.
- They can be related or unrelated to you, but they will need to receive at least half their support from you.
- Unless they're one of the excluded qualifying relatives (such as a child, foster child, parent, sibling or one of your in-laws), the person will need to have lived with you the entire tax year.
- The dependent needs to have a gross income below $4,300 for 2021 ($4,400 for 2020). This includes both earned income from sources like self-employment and jobs and unearned income such as interest.
- The person can't claim dependents on their federal tax return or be married and filing jointly.
- There is no age limit given the other requirements are met.
Since the qualifying dependent requirements can get tricky, the IRS has provided an online tool to easily assess your eligibility. Along with answering questions about your own tax filing situation, you'll identify the dependent, their residency and their citizenship status. When you finish, the IRS will show which dependent tax credit would apply for your situation, and you'll see some instructions on income requirements and the tax filing process.
Consider also: Can I Get a Tax Refund if Claimed as a Dependent?
Understanding the Credit Amount
You can get as much as $500 for each qualifying dependent you claim this tax year, but the exact amount depends on your adjusted gross income (AGI).
Single and head of household filers can get the full amount with incomes of $200,000 or less. On the other hand, married couples filing a joint return can make up to $400,000. Beyond those limits, there's a phaseout where you may get a reduced credit, which you'll calculate when you fill out your tax forms.
You'll want to keep in mind that this is not a refundable credit like the Child Tax Credit. So, if you still have a $1,000 tax liability after other tax deductions and credits are considered, the Credit for Other Dependents could cut your tax bill by $500. However, you won't get a $500 tax refund check if you end up without a tax liability.
Claiming This Income Tax Credit
When you complete your Form 1040 tax return, you'll first list your dependents' names with their tax ID numbers, relationship and the credit type you're claiming. You'll then need to fill out Schedule 8812, Credit for Other Qualifying Children and Other Dependents. This detailed document has multiple parts with subsections and assesses your eligibility for the Child Tax Credit, Credit for Other Dependents and Additional Child Tax Credit.
Schedule 8812 starts with your AGI and then requests various details about your filing status, dependents and any advanced payments. These questions will both show which of the dependent credits apply and what your credit amount will be. You'll get asked to fill out various worksheets – including one to calculate your earned income – from the Schedule 8812 instructions along the way.
You can also fill out Form 2441 to determine if you're eligible for the Child and Dependent Care Credit as well. A tax preparer can help you best assess which dependent tax credits you're eligible for as well as offer other tax tips.
Consider also: Which Form 1040 Do You Need for 2022?
- IRS: Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents?
- IRS: Schedule 8812
- IRS: 2021 Instructions for Schedule 8812
- IRS: Form 2441
- IRS: Publication 972 (2020), Child Tax Credit and Credit for Other Dependents
- IRS: Publication 501 (2021), Dependents, Standard Deduction, and Filing Information
- IRS: An Overview of the Credit for Other Dependents