We all have to pay taxes, but when it comes time to file that tax return, most of us are keen to pay as little as possible. Fortunately, there are systems in place that allow for deductions, exemptions, and other rules that lessen your tax liability.
One of the most common of these is claiming a dependent.
While claiming a dependent can help you save thousands a year, there are strict guidelines around who you can claim. In this article, we’ll answer one of the most burning tax questions: “Can you claim yourself as a dependent?”
What Is a Dependent?
According to the Internal Revenue Service (IRS), a dependent is a person “other than the taxpayer or spouse who entitles the taxpayer to claim a dependency exemption.”
Dependents can include a son, daughter, stepchild, brother, sister, or parent who relies on the taxpayer for financial support.
Before 2018, claiming someone as a dependent meant reducing the amount of a taxpayer’s income that was subject to taxes, known as an exemption deduction. Since 2018, however, this has been replaced by the Child Tax Credit and Other Dependent Credit, which is a dollar for dollar reduction in your tax bill.
Not everyone can qualify as a dependent, however. There are strict rules that determine who can be claimed as a dependent.
Can You Claim Yourself As a Dependent?
No, you cannot claim yourself or your spouse as a dependent on your tax return.
Prior to 2018, however, you could file a personal exemption, which acted much the same as claiming yourself as a dependent. However, the Tax Cuts and Jobs Act made significant changes to the tax code.
Personal exemptions have been eliminated until 2025, however, the standard tax deduction has been increased. For many people, these two changes canceled each other out.
Other Credits and Deductions
Even though you may no longer claim personal exemptions for yourself or your spouse, there are plenty of other deductions and exemptions that can help increase your tax refund and/or lower your bill.
Earned Income Tax Credit (EITC)
This credit allows low- to moderate-income workers to reduce their tax liability by up to $7,000. It’s worth mentioning, however, that your exact credit amount will vary depending on your income, how many children you have, and other factors.
In order to qualify for the EITC, you must meet certain requirements, including (but not limited to):
- Earned less than $59,187 in the tax year
- Earned less than $10,300 in investment income for the tax year
- Have a valid social security number
- Be a U.S. citizen or resident alien for the entire tax year
- Not file Form 2555, Foreign Earned Income
Child and Dependent Care Credit
If you are paying for someone to take care of your child (or another dependent), while you work, you may qualify for the Dependent Care Credit.
There are no income requirements for this credit, but the person receiving care must qualify.
Education-Related Credits and Deductions
If you’re a student, you may have some extra opportunities to save money on your taxes.
The American Opportunity tax credit lets you claim the first $2,000 you spent on tuition, books, and equipment and up to 25% of the next $2,000, for a maximum of $2,500. Similarly, the Lifetime Learning credit allows you to claim 20% of the first $10,000 spent on tuition and fees, for a maximum of $2,000.
Even after you graduate, the student loan interest deduction lets you write off up to $2,500 of your taxable income if you paid interest on student loans.
Optimize Your Finances
No matter your income, paying fewer taxes is likely one of your biggest goals. While there are strict guidelines around which credits and deductions you are allowed to take, there are ways to maximize your income for yourself and your family.
At Optimizing Alpha, we aren’t just an accounting firm. We are committed to truly optimizing your finances with our expert accounting and tax preparation services. Whether you own a business or are just trying to prepare for retirement, our helpful staff will communicate with you year-round—not just during tax season! And if you’re managing taxes for a team of employees, we can advise you of everything you need to keep things running, from the differences between a W-4 and W-2 to hiring independent contractors.
Contact us today to learn more about how we can help lower your tax liability and help you reach your financial goals.
