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Tip of the Week

February 14, 2018

To be or not to be a dependent

It is a conundrum for many students and families – why a dependent on a tax return is not the same thing as a dependent student for financial aid.

It is understandable why it is confusing. Filing the FAFSA and income taxes are linked, and it is easy for someone who is not dealing with it every day (and even for those of us who are!) to get it confused.

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Financial aid professionals have an understanding of the dependency issue on the FAFSA. Claiming dependents on taxes can get complicated though. The IRS has issued the following key points to keep in mind on exemptions and dependents on tax returns.

• Claiming Personal Exemptions. On a joint return, taxpayers can claim one exemption for themselves and one for their spouse. If a married taxpayer files a separate return, they can only claim an exemption for their spouse if their spouse meets all of these requirements. The spouse:
• Had no gross income.
• Is not filing a tax return.
• Was not the dependent of another taxpayer.
• Claiming Exemptions for Dependents. A dependent is either a child or a relative who meets a set of tests. Taxpayers can normally claim an exemption for their dependents. Taxpayers should remember to list a Social Security number for each dependent on their tax return.
• Dependents Cannot Claim Exemption. If a taxpayer claims an exemption for their dependent, the dependent cannot claim a personal exemption on their own tax return. This is true even if the taxpayer does not claim the dependent's exemption on their tax return.
• Dependents May Have to File a Tax Return. This depends on certain factors like total income, whether they are married, and if they owe certain taxes.

Taxpayers can get questions about claiming dependents answered by using the Interactive Tax Assistant tool on IRS.gov. The ITA called Whom May I Claim as a Dependent will help taxpayers determine if they can claim someone on their return.

Mapping Your Future provides this information as a service. Mapping Your Future recommends contacting a qualified tax advisor for assistance or visit irs.gov for more information.

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Mapping Your Future^®, Inc.
P.O. Box 2578, Sugar Land, TX 77487
(800) 374-4072