This time of year, everyone's looking for ways to reduce their taxes. Claiming dependents is a great way to get more personal exemptions and cut your taxable income by as much as $3,900. But who qualifies as a dependent?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through what it takes to claim a dependent on your taxes. Dan notes that children age 18 or younger, or full-time students up to age 23, are the most typical dependents, with the requirement that the child live with you for more than half the year and that you provide half the child's financial support. But Dan also notes that other people can count if they live with you or if they are sufficiently close relatives, including parents, grandparents, uncles and aunts, or in-laws. However, their gross income has to be less than $3,900 and you must provide more than half of their financial support. With the tax deduction worth as much as $1,500 to some taxpayers, it's worth looking into whether you're claiming all the dependents to whom you're entitled.
Take advantage of this little-known government tax rule
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report "The IRS Is Daring You to Make This Investment Now!," you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.