Are Family Members Deductible Per Person on Taxes?
Unravel the complexities of claiming family members on your taxes. Understand how deductions and credits apply, whether per person or through other criteria.
Tax deductions and credits play a significant role in reducing the amount of tax owed or increasing a refund. These tax benefits are designed to alleviate the financial burden on taxpayers, and their application often depends on individual circumstances and household composition. Understanding whether family members are “deductible per person” involves navigating specific rules that determine eligibility for various tax benefits. Some benefits are indeed calculated on a per-individual basis, while others are tied to broader household expenses or income levels.
Defining Qualifying Dependents
Central to understanding family-related tax benefits is the concept of a qualifying dependent. The Internal Revenue Service (IRS) categorizes dependents into two main types: a qualifying child or a qualifying relative. Each category has distinct criteria that must be met for a person to be claimed on a tax return.
A qualifying child must satisfy five specific tests to be claimed:
Relationship: The individual must be the taxpayer’s son, daughter, stepchild, foster child, sibling, stepsibling, half-sibling, or a descendant of any of them.
Age: The child must generally be under 19 at the end of the tax year, or under 24 if a full-time student, or any age if permanently and totally disabled.
Residency: The child must have lived with the taxpayer for more than half of the tax year, with exceptions for temporary absences like schooling or medical care.
Support: The child cannot have provided more than half of their own financial support for the year.
Joint Return: The child cannot file a joint tax return for the year.
A qualifying relative is someone who does not meet the criteria of a qualifying child. This category has four tests:
The person cannot be a qualifying child of the taxpayer or any other taxpayer.
They must either live with the taxpayer all year as a member of their household or be related to the taxpayer in a specific way, such as a parent, grandparent, aunt, uncle, or certain in-laws.
Their gross income for the 2024 tax year must be less than $5,050.
The taxpayer must have provided more than half of the person’s total support during the calendar year.
Tax Benefits for Dependents
Claiming a qualifying dependent can unlock tax credits, which directly reduce the amount of tax owed. A tax credit is generally more beneficial than a deduction because it provides a dollar-for-dollar reduction of tax liability, unlike a deduction which only reduces the amount of income subject to tax.
The Child Tax Credit (CTC) benefits families with qualifying children. For the 2024 tax year, this credit can be worth up to $2,000 for each qualifying child. A portion of this credit, up to $1,700 per child, can be refundable through the Additional Child Tax Credit (ACTC), meaning taxpayers could receive money back even if they owe no tax. To qualify for the full amount, a taxpayer’s modified adjusted gross income (MAGI) must not exceed $200,000 for single filers or $400,000 for those married filing jointly. The credit amount is reduced by $50 for every $1,000 that MAGI exceeds these thresholds.
For dependents not qualifying for the Child Tax Credit, such as older children or qualifying relatives, the Credit for Other Dependents (ODC) may be available. This nonrefundable credit is worth up to $500 for each eligible dependent. It provides a direct reduction in the amount of tax owed. This credit applies to dependents of any age who have a Social Security number or Individual Taxpayer Identification Number and meet the qualifying dependent criteria.
Other Family-Related Deductions and Their Calculation
Beyond direct per-person credits, other tax benefits can impact a family’s tax situation. These deductions and credits are often based on specific expenses incurred rather than a fixed amount per individual.
The Medical Expense Deduction allows taxpayers to deduct unreimbursed medical expenses for themselves, their spouse, and their dependents. This deduction is available only if these expenses exceed 7.5% of the taxpayer’s adjusted gross income (AGI) for the 2024 tax year. It is an itemized deduction, meaning taxpayers must choose to itemize rather than take the standard deduction, which may not be beneficial for everyone given the increased standard deduction amounts.
The Child and Dependent Care Credit helps taxpayers who pay for care to allow them to work or look for work. For the 2024 tax year, the maximum care expenses for the credit are $3,000 for one qualifying person or $6,000 for two or more. The credit amount is a percentage of these eligible expenses, ranging from 20% to 35%, depending on the taxpayer’s income.
The Student Loan Interest Deduction reduces taxable income by the amount of interest paid on qualified student loans. For the 2024 tax year, taxpayers can deduct up to $2,500 of student loan interest. This is an “above-the-line” deduction, meaning it reduces adjusted gross income and can be claimed even if the taxpayer takes the standard deduction. This deduction is subject to income limitations, with phase-outs beginning at a modified AGI of $80,000 for single filers and $165,000 for those married filing jointly.