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Do I Qualify for a Other Dependent Tax Credit? by Jack Winter, CPA/PFS, CFP


Posted on May 26, 2020 by Jack Winter

When filing federal tax returns and claiming credits that can reduce your tax liabilities, remember that dependents are not limited to your young children. The Tax Cuts and Jobs Act (TCJA) introduced a nonrefundable tax credit for other dependents, age 17 and older, who receive more than half of their financial support from you and who may or may not be your relative.

Tax credits are generally more valuable than tax deductions, which reduce the amount of your income that is subject to tax. In contrast, tax credits are applied to your tax bill to provide a dollar-for-dollar reduction in the amount of taxes you owe the government. A non-refundable credit can reduce your tax liability to zero, whereas a refundable tax credit can reduce your tax bill even further, potentially resulting in a refund to you from the IRS.

When it comes to tax credits for dependents, the TCJA increased the Child Tax Credit from $1,000 to $2,000 per qualifying child under age 17 for tax years 2018 through 2025. Up to $1,400 of that credit can be refundable in 2019, depending in the taxpayer’s adjusted gross income. The new tax law also introduced a credit for dependents other than children who qualify for the Child Tax Credit.

The Other Dependent Tax Credit (ODC), also referred to as the Family Tax Credit and the No-Child Tax Credit, provides a nonrefundable credit of $500 for each qualifying dependent, age 17 or older, who depends on you for support and may or may not be a relative. The credit begins to decrease in value when your adjusted gross income exceeds $200,000, or $400,000 if you are a married couple filing joint tax returns.

To help you understand who may qualify as an “other dependent” for purposes of claiming the ODC, consider the following tests:

The Support Test: You must provide more than half of the purported dependent’s total support during the year.

The Relationship Test: If the person you are claiming as a dependent is not a relative, he or she must have lived with you for the entirety of the tax year. Therefore, you can receive a credit for parents, brothers and sisters, nieces and nephews, stepchildren and in-laws, even if they do not live with you in your home.

The Income Test: The person for whom you provide support and intend to claim as a dependent for purposes of claiming the IDC must have earned no more than $4,200 in gross income for the tax year.

In addition, the person you may claim as an other dependent must be a U.S. citizen, a U.S. national, or a U.S. resident alien with a Social Security Number issued by the Social Security Administration (SSA) or an Individual Taxpayer Identification Number (ITIN) or Adoption Taxpayer Identification Number (ATIN) issued by the IRS.

About the Author: Jack Winter, CPA/PFS, CFP, is an associate director in the Tax Services practice of Berkowitz Pollack Brant, where he provides estate planning, tax structuring and business advisory services to individuals, families and business owners. He can be reached at the CPA firm’s Ft. Lauderdale, Fla., office at (954) 712-7000 or via email at info@bpbcpa.com.

Information contained in this article is subject to change based on further interpretation of tax laws and subsequent guidance issued by the Internal Revenue Service.