Paper Example on Tax Benefits of Claiming a Qualifying Relative as Dependent

Introduction

A qualifying relative refers to an individual designated or allowed to claim to be dependent by the federal income tax code. The taxpayer is assumed to have provided a considerable amount of financial support to them during the tax year (Hetherington, 2018). Claiming a qualifying relative or child as a dependent lets a taxpayer take up more exemptions, thus reducing their taxable income. The Internal Revenue Service requires a qualifying relative to be an individual whose addition to the taxpayer's household causes more expenditure (Hetherington, 2018). A qualifying relative does not necessarily have to be related to the taxpayer. A qualifying child, on the other hand, should be related to the taxpayer.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Scenario 1

Susan qualifies to become a qualifying relative since her parents provide more than half of her support during the tax year. Susan also lives with her parents during school breaks, meaning she adds the expense to her parent's income. She does not satisfy the relationship qualifications of a qualifying child since she is above the age of 24. However, she can be claimed as a qualifying relative since she is unmarried meaning no one else has claimed her as a qualifying relative. Additionally, she has no income and as such, solely relies on her parents. Therefore she qualifies to be claimed as a qualifying relative.

Scenario 2

Samantha stayed with Brian and Jamie for an entire year and fully depended on them, thus qualifying her as a qualifying relative. She is related to Brian but does not qualify to be a qualifying child. Her age does not bar her from being a qualifying relative since it has no age limit. The fact that she is unmarried means that she has not been claimed as a dependent by a spouse and as such making her a dependent of Jamie and Brian for the period she has been living with them. They can thus file for tax exemption since Samantha has been their dependent for the tax year.

Scenario 3

Betty would qualify to be a qualifying relative to Camilla and Andy since they provide more than half of her support. However, there a few qualifications that she does not satisfy in order to be considered a qualifying relative. First of all, Betty lives alone, meaning she is not a member of Andy and Camilla's household. Secondly, she earns $30,000 per year, and according to the IRS, she should have earned less than $4150. Therefore Betty does not qualify to be a qualifying relative even though she is related to them.

Scenario 4

Manny qualifies to be a qualifying child to his parents because he is 22 years old. One of the qualifications for a supporting child is that an individual has to be between the age of 19 and 24. He is also a full-time college student, thus satisfying the other requirement. Manny depends on his parents for more than half of his support, thus satisfying the third requirement. The requirements for a qualifying child does not bar one because of their income, and as such, the $20000 he earns does not disqualify him from being a qualifying child. Therefore, he qualifies to be a qualifying child to his parents.

There are various requirements for an individual to qualify as either a qualifying relative or child, and the scenarios above clearly highlight some of them. Claiming a qualifying relative or child allows one to get tax exemptions or tax credit.

References

Hetherington, K. M. (2018). Child Tax Credit Now Higher, More Widely Available. Journal of Accountancy, 225(5), 56