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Why Claim Dependents When There Is No Benefit for 2019 Taxes?

Claiming a dependent on your taxes has always yielded what is called an exemption. This means that a certain amount of your income was exempt from taxation. For 2017, the amount of each dependency exemption you were able to claim meant that $4,050 of your income was not federally taxable income.

For example, a family with four children would be able to claim six exemptions (four dependency exemptions and two personal ones for the mother and father). This means that the family would have been able to exempt $24,300 (6 x $4,050) from their income.

But with 2017’s Tax Cuts and Jobs Act, your ability to claim a dependency exemption was eliminated. However, please note that the ability to claim a dependent was not eliminated.

So Why Would I Claim a Dependent If I Do Not Receive an Exemption?

Claiming a dependent still enables you to receive certain credits or enhance the benefits of claiming certain credits.

For example, the Earned Income Tax Credit increases the amount a person receives as their refundable credit when they have a dependent on their return.

Also, the Child Tax Credit was expanded and now yields a $2,000 reduction in taxes instead of last year’s $1,000 reduction.

In addition to this, claiming dependents also affects who is able to claim education credits and deduct student loan interest, whether it be the actual student or the parents.

Credits are much more powerful than exemptions and deductions because deductions only reduce your taxable income. Credits are a dollar for dollar reduction in either the tax you owe or a dollar for dollar increase to your refund.

 


This article does not constitute financial, legal, or tax advice. For help regarding your specific situation, please consult a local professional.

By Foxx Financial

We are focused on financial literacy and a want to help others grow assets, reduce and remove debt, or just understand financial concepts better.

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