Dependents and Exemptions – Get the Tax Facts!

Dependents and Exemptions - Get the Tax Facts! by Stephen J. Ganns, CPA{3:30 minutes to read}  Basically, there are two types of exemptions:

  • Personal
  • Dependent

Usually, you can deduct $3,950 for each exemption you claim on your 2014 tax return. Most states also give a deduction for dependents. 

If you file a joint return, you will usually claim exemptions for yourself and your spouse. If you file a separate return, you can still claim exemptions for your spouse as long as they:

  • Had no gross income;
  • Are not filing a tax return;
  • Were not the dependents of another person.

Claiming Exemptions

In order to claim an exemption for a person, you must have their Social Security number available. Also, starting this year, you must have information regarding whether or not they had healthcare coverage. They must either have healthcare coverage, called Minimum Essential Coverage, or have an exemption from this coverage requirement. If not, you will have to make a shared responsibility payment when you file your 2014 tax return. However, they can still be claimed as a dependent.

Sometimes people you claim as dependents may have to file. This depends on certain factors such as:

  • The amount of their income;
  • Whether they are married;
  • If they owe certain taxes;
  • If they are full-time students.

Usually you cannot claim an exemption for someone who makes more than $3,950. However, if that person is a full time student under 24 years of age, and you paid half of their support, they can make more than that threshold and still be claimed as a dependent.

One tricky thing with college students is parents not claiming the exemption for a child. In other words, with the exemption phasing out above a certain amount of income, parents might decide to let the child claim their own exemption. This is not allowed by the IRS. The only time a student CAN claim an exemption for themselves is if no one else MAY claim that exemption, not whether someone chooses to. So if you have the right to claim your child and do not, that child cannot claim that exemption.

The IRS has a tool called the “Interactive tax assistant” on their website which can determine if a person qualifies as a dependent. A dependent does not necessarily have to be a direct child or a linear family member. Nieces, nephews, etc. can qualify, and sometimes non-family members. (More on that in another blog.)

Basically, that’s a summary of who qualifies based on the IRS rules and regulations for dependents and exemptions. As always for further information, consult with the IRS, your tax advisor or us at 914-682-7007.

Stephen J. Ganns

Stephen J. Ganns, CPA
914-682-7007
steve@gannscpa.com
www.gannscpa.com

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