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Jean Folger has 15+ years of experience as a financial writer covering real estate, investing, active trading, the economy, and retirement planning. She is the co-founder of PowerZone Trading, a company that has provided programming, consulting, and strategy development services to active traders and investors since 2004.
Updated June 02, 2024 Reviewed by Reviewed by Lea D. UraduLea Uradu, J.D. is a Maryland State Registered Tax Preparer, State Certified Notary Public, Certified VITA Tax Preparer, IRS Annual Filing Season Program Participant, and Tax Writer.
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Part of the Series Tax Deductions and Credits GuideUnderstanding Tax Breaks
Tax Credits for Parents/Students/Dependents
Tax Deductions for Real Estate
Tax Deductions for Retirement Savings
Can you claim a dependent on your tax return? If so, there are federal tax breaks, such as the earned income tax credit (EITC) and the child tax credit (CTC), that can lower your tax bill or even increase your refund.
Here's a quick look at who qualifies as a dependent and how claiming one can affect your income tax return.
A dependent is someone for whom you provide at least half of their financial support during the year—for household expenses, medical care, education, clothing, and the like. If you have a dependent, you qualify for several tax benefits that could save you money at tax time.
An individual can be a dependent of only one taxpayer in a tax year. To qualify as a dependent, the person must:
A provision in the Tax Cuts and Jobs Act (TCJA) eliminated the personal exemption, which remains at $0 until 2025, when it may be restored or permanently eliminated.
Though all dependents must meet the general requirements listed above, you can't claim someone as a dependent unless they are your child or a qualifying relative. The IRS uses different tests to determine who qualifies.
Not all children are qualifying children under the tax laws. According to the IRS, a person must satisfy five tests to be a qualifying child. A qualifying child:
A person you claim as a qualifying relative must satisfy four tests. A qualifying relative:
In the case of divorced or legally separated parents, a child is generally the dependent of the custodial parent. The custodial parent is the one the child lived with for the greater number of nights during the year. If both parents had equal time during the tax year, the parent with the higher adjusted gross income (AGI) can make the claim.
A tax credit reduces the amount of tax you owe on a dollar-for-dollar basis. A tax deduction lowers your taxable income, so you owe less tax.
Of the two, tax credits are more favorable because they are subtracted off the top of your total taxes owed, saving you more money. You can claim several tax credits and deductions if you have a dependent.
The CTC is a tax benefit granted to taxpayers for each qualifying dependent child.
The maximum amount for the 2024 tax year is $2,000 for each qualifying child. The credit begins to phase out when the filer's modified adjusted gross income exceeds $200,000 ($400,000 in case of a joint return).
The refundable portion of the credit, also known as the additional child tax credit, maxes out at $1,700 for 2024.
The $500 nonrefundable credit for other dependents remains unchanged.
The EITC is a refundable tax credit that helps lower-income taxpayers reduce the amount of tax owed on a dollar-for-dollar basis. Though the credit is available to taxpayers who don't have children, those with dependents will receive a higher credit. The credit increases with the addition of each child to the family up to three children.
Here's a look at the EITC AGI limits and maximum credit amounts for the 2024 tax year. The maximums reflect the amount of the credit for filers with three or more children:
| Earned Income Tax Credit (2024) | |||
|---|---|---|---|
| Dependents | Single or Head of Household | Married Filing Jointly | Maximum EITC |
| 0 | $17,640 | $24,210 | $600 |
| 1 | $46,560 | $53,120 | $3,995 |
| 2 | $52,918 | $59,478 | $6,604 |
| 3+ | $56,838 | $63,398 | $7,430 |
The child and dependent care credit, which can be claimed using IRS Form 2441, provides relief to parents who pay for the care of a qualifying child or disabled dependent while working or looking for work. Depending on your income, you may qualify for both the child tax credit and the child and dependent care credit.
In the 2024 tax year, you can include up to $3,000 of eligible expenses for a maximum credit of $1,050 if you have one qualifying dependent when calculating the credit. It rises to $6,000 of eligible expenses and a $2,100 credit if you have two or more dependents.
The percentage of those expenses allowed as a credit depends on your income (and your spouse's if you file a joint return). The maximum percentage is 35%. As your AGI climbs, the credit is eventually reduced to $0. If your AGI is $438,000 or higher, you won't get the credit.
The child and dependent care credit is worth up to $1,050 for one dependent and up to $2,100 for two or more.
The student loan interest deduction allows you to deduct up to $2,500 of the interest you paid on a student loan during the tax year. For example, if you fall into the 12% tax bracket and claim the full amount, the deduction would reduce your tax for the year by $300 ($2,500 × 12%).
If you paid less than $2,500 in student loan interest, your deduction is capped at the amount you paid. The student loan must be taken out for you, your spouse, or your dependent, which can be a qualifying child or a qualifying relative.
For 2024, the deduction gradually phases out starting at a modified AGI (MAGI) of $75,000 for single filers, and $155,000 for married couples filing jointly.
The American Opportunity Tax Credit (AOTC) helps offset the cost of the first four years of a student's postsecondary education. The credit allows a maximum annual tax credit of $2,500 per eligible student for qualified education expenses.
If the credit brings your tax bill to $0, you can get a refund of up to 40% of the remaining credit (up to $1,000).
Either the student or someone who claims the student as a dependent can take the AOTC on their income tax return. Your MAGI must be $80,000 or less ($160,000 if filing jointly) to claim the full credit. The credit begins to phase out if your MAGI is between:
You can't claim the credit if your MAGI is above those thresholds.
Room and board, medical expenses, and insurance—or any qualified expenses paid for with 529 plan funds—don't count as qualified education expenses.
You may be able to deduct certain out-of-pocket expenses you paid for medical and dental care for yourself, your spouse, and your dependents (i.e., a qualifying child or a qualifying relative). As far as the IRS is concerned, medical expenses are the costs of "diagnosis, cure, mitigation, treatment, or prevention of disease."
The deduction applies only to expenses that exceed 7.5% of your income. So, if your AGI is $50,000, you can claim the deduction for medical expenses that exceed $3,750 ($50,000 × 7.5%).
In addition to the numerous tax credits and deductions, you may qualify for head of household status if you have a dependent. Taxpayers who file as heads of household have a higher standard deduction and a lower marginal tax rate than single filers, both of which can lower your taxes.
To file as head of household, all of the following statements must be true:
Yes. As long as you meet the qualifications for each credit, you can claim all three on your income tax return. All these credits phase out gradually at specific income levels.
You can claim the child and dependent care credit if you paid a person or an organization to care for your dependent under the age of 13 (e.g., your child) or a dependent of any age who can't care for themselves and lives with you for at least half of the year.
Your 2024 tax return is due Tuesday, April 15, 2025. You can get an automatic six-month extension by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Note that this gives you an extension only for the paperwork. You still need to pay the amount you estimate you owe by the deadline.
A tax credit is subtracted directly from the total of the tax you owe. A tax deduction reduces your taxable income, which is the amount of income on which you owe taxes. For example, a $1,000 tax credit lowers your tax bill by $1,000. A $1,000 tax deduction reduces your taxable income by $1,000. So, if you fall into the 22% tax bracket, that $1,000 deduction would save you $220 ($1,000 × 22%).
If you can claim a dependent on your tax return, numerous tax credits and deductions could help lower your tax bill or increase your refund. It's possible to save thousands of dollars at tax time if you claim all the tax breaks to which you're entitled.
Article SourcesUnderstanding Tax Breaks
Tax Credits for Parents/Students/Dependents
Tax Deductions for Real Estate
Tax Deductions for Retirement Savings
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The Smith Maneuver is a Canadian tax strategy that makes interest on a residential mortgage tax-deductible. Borrowers need a readvanceable mortgage to use it.
The general business credit is the total value of the separate business tax credits a business claims on its tax return for a specific year.
Section 1031 of the U.S. tax code permits a business to postpone taxes on gains from the sale of business property when the proceeds are invested in other property.
Business expenses are costs incurred in the ordinary course of business. Business expenses are tax-deductible and are always netted against business income.
A qualified higher education expense is a tax credit for the parents of students attending a college or other post-secondary institution.
A filing extension is an exemption made for taxpayers who are unable to file their federal tax return by the regular due date.
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