In 2017 Congress passed major tax reform legislation, known as the Tax Cuts and Jobs Act of 2017 (TCJA). The changes relating to the Act’s provisions will affect the tax returns of almost every single taxpayer. These changes, however, are temporary in nature and generally apply beginning in 2018 and ending on December 31, 2025. Accordingly, most of the provisions of the Act applicable to individual taxpayers will expire in 2026.
Some taxpayers are of the perception that they can only claim their own children on their tax returns, as legitimate dependents. Taxpayers, however, can also claim on as dependents, other persons who they support financially. Under tax law, these persons may qualify to be their “Qualified Relatives.” This person has to be someone who you actually supported financially for the tax year in question, but there are four basic tests that must be satisfied, to determine if you are eligible to claim that individual as your qualifying relative.
Claiming a child on your tax return can yield quite a few benefits for the taxpayer, and some of these can be significant. Taxpayers will be able to claim the personal exemption for the child, the child tax credit, and the child and dependent care tax credit. For unmarried taxpayers, claiming a child will qualify them for the Head of Household filing status. Taxpayers may also be eligible to claim the earned income credit if their income falls below a certain amount.
People sometimes receive money from a variety of sources during any given tax year, and are oftentimes confused as to which inflows are taxable, and which are not. While most income is taxable, there are some sources of funds that are not considered income as such, and you may not have to include income from these sources on your tax return as taxable income.
For an unmarried taxpayer, filing Head of Household (HOH) can have substantial financial benefits over filing as a single status taxpayer. In filing as Head of Household, one enjoys lower tax rates and a larger Standard Deduction. So if you are unmarried at the end of the tax year, you may consider filing your taxes using the favorable Head of Household (HOH) filing status, if two basic conditions are met.
Every taxpayer who files a Form 1040 tax return is automatically entitled to a Standard Deduction. This is a predetermined amount that the IRS allows taxpayers to deduct from their incomes. The amount varies between taxpayers, and is determined primarily by the taxpayer’s filing status.