What Is a Dependent Deduction?

Cindy Quarters

When dealing with income taxes, the taxpayer is given credit for certain types of expenses. Many times the credit is given as a flat amount, based on what the government considers to be reasonable costs for a particular situation. A dependent deduction is typically the standard amount that the US Internal Revenue Service (IRS) allows a taxpayer to take off of the amount owed in taxes because he or she has been supporting a dependent. Something similar exists in many countries, but it is not necessarily called a dependent deduction.

When filing their taxes, taxpayers with children can claim a dependent deduction for each child.
When filing their taxes, taxpayers with children can claim a dependent deduction for each child.

The IRS has rules that specify what constitutes a dependent. If a person files taxes and tries to claim a person who does not meet the IRS requirements, the deduction will be disallowed. At that point the full amount of the dependent deduction becomes due, and most likely there will also be penalties assessed on the amount that wasn’t paid.

If a taxpayer provides support for an elderly parent or other relative, he can claim a dependent deduction if certain criteria are met.
If a taxpayer provides support for an elderly parent or other relative, he can claim a dependent deduction if certain criteria are met.

If there is any doubt as to whether or not a person qualifies as a dependent under IRS rules, it is best to check before filing taxes. The IRS requires that a qualifying child must not have supported him or herself for more than half the year and cannot have filed a joint return with anyone. The child must also typically be the filer’s child, step-child or adopted child, and must live with the taxpayer.

Dependent deductions lower a person's tax liability thereby potentially increasing his income tax refund.
Dependent deductions lower a person's tax liability thereby potentially increasing his income tax refund.

There are additional rules, plus there are regulations for other dependent persons that may qualify for the dependent deduction. The person does not have to be the taxpayer’s child in every case, but can instead be another relative. This can include a parent, grandparent, aunt, uncle or other relative; to be accepted the relative must meet the IRS criteria for a qualifying dependent, which typically includes living with the taxpayer and certain other criteria.

When a taxpayer has a relative that qualifies under the IRS rules, he or she can take the standard dependent deduction. The actual amount varies each year, but in 2010 it was $950 US Dollars (USD). This amount is used to reduce the taxpayer’s adjusted gross income, resulting in a lower tax liability. The amount may be adjusted for any of a number of reasons, including the dependent’s age, whether or not he or she is blind, and if the person purchased a new vehicle and had to pay taxes on it. Other factors may be considered as well.

Grandparents may receive a dependent deduction if they are the primary caregiver of their grandchild.
Grandparents may receive a dependent deduction if they are the primary caregiver of their grandchild.

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Discussion Comments

Markerrag

@Terrificli -- This whole discussion underscores the need for a fair, flat tax system. The problem with the current system is that people pay for those deductions. If you take a tax credit for raising a child, then someone without kids makes up the difference. If you take the mortgage interest deduction, then people who rent wind up paying what you didn't.

A fair, flat tax would get rid of the weird system of deductions and would save us all money, to boot.

Terrificli

@Melonlity -- I don't know if that is a reward as much as it is an acknowledgment that raising children is darned expensive and parents ought to be cut a break at tax time.

I do know a lot of people who don't have children gripe about the tax break, but I've got a deal for them. You take my kid and my tax break and let's see who has more money left over at the end of the year. I promise you it will be me. Raising a kid costs far more than one receives in a tax cut.

Melonlity

Those lucky parents, I say. Getting a nice, fat deduction for each dependent child must be nice. I do wonder why the government essentially rewards people for having children, but that is a great deduction for those who are fortunate enough to get to take it.

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