Family Members Living With You? 4 Reasons That Could Help Your Taxes
More and more Americans are helping provide a home and support for other family members. This often includes adult children and older relatives. And if you're in this situation, you're surely doing so out of love and concern. But you can get some financial help on your tax bill that you may not be aware of.
Dependency. Many people aren't aware that they can sometimes claim as dependents adults and minors who are not their own children. There are more rules to doing this, but it can be beneficial to your taxes in several ways, including the Child Tax Credit and reducing your taxable income. Tell your tax preparer about anyone for whom you are paying the costs of room and board or that is living in your home. He or she can help determine if you qualify to claim that person as a dependent.
Education Expenses. If your adult child is going to school — even away from home — you may be able to continue claiming them as a dependent. Along with this, you can generally claim their education expenses for tax credits. There are two education tax credits, the American Opportunity Credit and the Lifetime Learning Credit, which can result in up to $2,500 in refunds or tax reductions.
Medical Expenses. Claiming another person as a dependent — including a qualifying relative or child — means you can also deduct their medical expenses (and mileage) when you itemize your deductions. This can add up quickly in the case of an ill or older family member. And it could include things like adjustments you must make to your home to accommodate disabled persons or add permanent accessibility features.
Collateral Adjustments. While the most obvious impact of claiming an adult on your return is lower taxable income, it can have several collateral effects on other credits and tax rates. You may find, for example, that more personal exemptions or qualifying for Head of Household status reduces your taxable income and allows you to qualify for more tax credits later in the return — notably the Additional Child Tax Credit or Retirement Savings Credit. It could also lower your tax rate.
Clearly, the decision to claim family members on your taxes can have far-reaching impacts. Be sure to discuss your situation thoroughly with your tax preparer to decide if you qualify to do so. But the rewards will surely be worth the extra effort. Contact a service, like The Tax Genius , for more help