Tips for dependent income tax deductions
To claim an individual as a dependent for income tax purposes, the person must either be a qualifying child or a qualifying relative. Taxpayers with dependents can claim an exemption for each one and certain other deductions and credits on their federal tax returns.
If you and an ex-spouse or partner share custody of a dependent child, the question often arises of who gets to claim the child on the tax return. Normally, the custodial parent gets the exemption, but parents can agree to allow the child to be claimed by whichever parent will benefit the most from the exemption and deductions. The parent not claiming the child should file form 8332, a release of claim, with the tax return.
If parents cannot agree and both want to claim the child and other factors are similar, whoever files first wins. The IRS will automatically deny the exemption claim by the second parent if a claim has already been made by the first filer. The IRS computers simply match up Social Security numbers and reject the claim for a duplicate number.
Claiming a Non-resident Alien Relative
Taxpayers can claim a non-resident alien relative as a dependent in some circumstances, even if the relative does not live in the U.S. If the relative is a resident of Canada or Mexico, an exemption is allowed if the taxpayer contributes more than half the relative's support and the relative earns less than the exemption limit ($3,650 in 2009).
Head of Household Status
A taxpayer can claim a higher exemption if he can qualify for Head of Household status. The tax code defines a head of household as an unmarried (single, divorced, legally separated or widowed) taxpayer who maintains a home for a qualifying child or a qualifying relative more than six months of the year.
Other Tax Benefits of Claiming Dependents
Claiming dependents also allows taxpayers to take advantage of other tax breaks including credits for higher education, dependent child care and child tax credits, adoption credits and earned income credits. When claiming an adult relative, the medical expense deduction can be a significant tax break, especially if the taxpayer pays for long-term care.