Here are the most important rules that you need to know about claiming dependents before preparing your taxes this year. Few things are more important than family. These are the people we share special memories with…the people we rely on when we hit tough spots. However, sometimes you are the family member who helps others out. This is what family is about — helping each other, regardless of the burden.
But the extra expense of additional family members can put a financial strain on you. The rising costs of food, electricity, gas, and water can all add up quickly. DO claim all qualifying children that were born or adopted within the tax year. Even if your child was born on December 31, your child may be able to be claimed as a dependent on your taxes.
Note that neither credit is available to married grandparents who file separately. For example, Amber filed a federal income tax return as head of household for reporting two dependent qualifying grandchildren, James and Jason. Both educational institutions qualify as eligible.
A possible alternative is an above-the-line AGI deduction for interest on qualified education loans. The grandchild must be enrolled at least half-time at the college. Again, for higher income grandparents, the ability for this deduction phases out once MAGI reaches a certain level. That there are no restrictions regarding the educational institution, and the qualifying transfer applies to any educational tuition expenses, ranging from nursery school to graduate school.
It does not include room, board, and books. In addition, the transfer is not subject to the generation-skipping transfer tax GST. The funds can be used to cover tuition, room and board, books, and supplies. There are two types of IRC section plans: prepaid tuition plans and college savings plans. Prepaid tuition plans may be offered at the state level of an eligible educational institution usually an in-state public university.
This pre-paid program allows for payment in advance of college credits for the designated beneficiary. The enrollment periods and cost are established by the state. College savings plans are individual investment accounts offered by nearly all states and managed by various financial institutions. The income can be used at any accredited college in the United States or abroad. This plan allows the contributions to be made to the account on behalf of the designated beneficiary.
Additional funds can also be contributed to an already existing account in regular amounts. A tax election must be made to treat the gift as if it were made in equal installments over a five-year period, and no additional gifts can be made to the beneficiary during this time.
There are AGI limitations on who can contribute. Examples include health and education exclusion trusts HEET , where direct payment of educational or medical expenses is not subject to the GST tax; dynasty trusts; Crummey trusts; and IRC section c trusts.
There are also many tax opportunities available for grandparents in general who may or may not be raising a grandchild. These amounts are also exempt from any GST implications. A flexible spending account FSA provides the ability to pay for eligible medical or dependent care expenses with an account that deducts pre-tax dollars from a paycheck.
The grandparent chooses the amount to be deducted, and the funds are set aside to be used for eligible expenses throughout the year. A healthcare FSA can reimburse or help pay for eligible healthcare expenses not covered by a health plan; the entire amount is available at the beginning of the year, even though it is deducted on a per-paycheck basis. In contrast, a dependent care FSA is not funded in advance, and the employee cannot receive reimbursement for the full amount of the annual contribution on day one.
Health savings accounts HSA combine pre-tax dollars with a qualified high-deductible health plan HDHP to help save money on eligible medical expenses. HSAs offer great flexibility, as well as tax-free contributions and distributions for eligible expenses. Other benefits include the allowance of carrying over a balance from year to year and accumulating interest in a money market account, the ability to stop and start an account or change the contribution amount at any time during the year, and the ability to choose when and how to reimburse from the account.
Starting over and raising a second family when a grandparent can be a financial shock. Community : Discussions : Taxes : Get your taxes done : Can i claim my grandchild as a dependent on my tax Enter a search word.
Turn off suggestions. Enter a user name or rank. Turn on suggestions. Showing results for. Search instead for. Did you mean:. New Member. Can i claim my grandchild as a dependent on my taxes My daughter lives with me, pays rent and gets food stamps and medicaid. Can I claim any of them on my taxes or will it affect her benefits?
Can i claim my grandchild as a dependent on my taxes can i claim my grandchild. Can i claim my grandchild as a dependent on my taxes See the response below. Can i claim my grandchild as a dependent on my taxes Can I claim my 2 rand kids if they lived with me all year and I'm just drawing social security. Level Can i claim my grandchild as a dependent on my taxes lewink55 If you are only getting Social Security you cannot get a tax refund unless you are having tax withheld from your SS.
You need income earned from working in order to get the child-related credits like child tax credit or earned income credit. The poster disclaims any legal responsibility for the accuracy of the information that is contained in this post.
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