Formerly known as Family Tax Credit, Credit for other dependents is a non-refundable credit given to the qualifying dependents. Let us know more about Credit for other Dependents in this guide by H&R Block India.
In a layman’s language, a ‘dependent’ is a person who relies on another person for emotional, financial or other support. As per the U.S. norms, a qualifying dependent may be a qualifying child or relative as determined by the Internal Revenue Code (IRC), who is eligible to be a taxpayer’s dependent for claiming dependent-related tax benefits and claims on the tax return.
The Tax Cuts and Jobs Act added a new Tax Credit named Credit for Other Dependents. It is a non-refundable credit and provides $500 per qualified dependent. The earlier version of the bill named this credit as “The Family Tax Credit” but the final version named it as the “Non-child Credit”. Form 1040 references this credit as the “Credit for Other Dependents”.
Examples might include an ageing parent who depends on you for care or a child whose support you provide but is 17 years old or older.
This credit is available for dependents for whom the taxpayers cannot claim the New Child Tax Credit 2018.
The IRC Test is applied to determine whether the dependent is a qualifying child or a qualifying relative to the taxpayer. A person must fulfil all the tests to be qualified for claiming dependency-related credits.
Earlier the Taxpayers were accredited with a dependency exemption of over $4000 for each individual on the tax return. After the Congress passed the New Tax Law 2018, the Children’s Dependency Exemption has been eliminated from current tax year. In place of the Dependency Exemption for each child, the Law has increased the standard deduction to $12,000 for parents who are married but filing separate returns; $18,000 for the heads of household and $24,000 for parents who file tax returns jointly.
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A. Yes, the Credit for Other Dependents also includes older dependents, if they are above the age of 18, or at the age of 23 (still in school and not earning) and having the SSN or ITIN.
A. It is based on your income level. But if the child is not provided with more than 50% of the support than the credit will not be accredited and does not fall under the category of a qualified child.
A. No, if you are filing MFS return, the child can be claimed by only one of the parent on their return and can’t be claimed by both of them.
We hope that this guide by H&R Block India will help you know more about the new tax credit added by TCJA named Credit for Other Dependents under the U.S. Tax laws and file your returns accurately.