As Congress attempts to pass the Tax Cuts and Jobs Act bill in what would be the biggest overhaul of the tax code in decades, here are some tips on what kind of exemptions you can claim for dependents to provide a valuable break.
The bill seeks to consolidate personal exemption for the taxpayer and taxpayer’s spouse into a larger standard deduction. On the personal exemption for children and dependents, that would be consolidated into an expanded child tax credit and a new family tax credit.
But let’s set aside these considerations, because these proposals might change or be dismissed as the House and Senate reconcile their versions of the bill, and focus on what the current law provides. Each exemption lowers by $4,050 the amount of income subject to tax for 2017
To claim someone as your dependent, the key requirement is that generally you have to contribute more than half of his or her total support for the year. Also, there’s a ceiling of $4,050 for 2017 on the amount of reportable income that a dependent is allowed to receive, not counting funds from tax-exempt sources like Social Security benefits, life insurance proceeds, gifts and inheritances.
About Julian Block
Attorney and author Julian Block is frequently quoted in the New York Times, Wall Street Journal, and the Washington Post. He has been cited as “a leading tax professional” (New York Times), an “accomplished writer on taxes” (Wall Street Journal), and “an authority on tax planning” (Financial Planning magazine). More information about his books can be found at julianblocktaxexpert.com.