If you are a parent of adult-aged kids, then you must be wondering whether or not to claim them as dependents on your tax returns. The main objective of claiming tax deductions for dependent kids is to lower the overall cost of bringing up a family. The deductible amount varies but in 2011, taxpayers were allowed to claim $3,700 in exclusion for every eligible child. If you are a family falling in the 25% tax range, then you could save approximately $925 for every child.
Before making up your mind whether or not to claim a child as a dependent, there are a few factors that you have to consider. This shouldn’t however, be a problem, especially for the purposes of tax deductions, as it is always safer to claim your kids as dependents for as long as possible. In fact, tax experts argue that they can be claimed as dependents on your return forever unless of course, they earn a lot of money or you are barred by the law from claiming them. Consider the following factors to decide whether you qualify and if it is economically feasible to retain your kids as dependents.
Age Factor: Legally, any child aged 19 and below can be claimed as a dependent kid. If they go to college, the age limit is extended to 24. Even if they finally hit 24 years or older, get employed, but earn less than $3,700 annually, they can still be claimed as “qualifying relatives” where the parent saves more in taxes than the child.
Your Children’s Education: If you have a child in college, then you may find it beneficial to claim, since you are likely to realize better tax benefits like the $2,500 education credit plus tuition and fees deduction until they turn 24, get married, graduate with a bachelors degree, etc.
Medical Expenses: If you still have a child living under your roof, then you can deduct medical costs as itemized deductions. This includes out-of-pocket child care. Please note that your kids automatically qualify for your medical insurance benefits until they turn 26, whether they are claimed as dependents on tax returns or not. This is as per the Affordable Care Act.
You must consider these factors when filing your tax return and go for the option that makes the best tax sense.