| For many people, tax forms are a complete | | | | doing a summer job, is not enough to require them |
| nightmare, being totally impossible to understand. | | | | to file their taxes. Regardless of whether they do or |
| Most of the confusion is related to the words used | | | | not, they can be counted as your dependent. |
| on tax forms. Amongst all of these fancy words that | | | | Exemptions, on the other hand, are subtracted from |
| are hard to understand, there are two words that | | | | your income when calculating taxes so that you |
| this article will clear up for you. They are dependents | | | | report a lower amount of income to the IRS and |
| and exemptions. | | | | thus pay less. Each dependent that you claim on your |
| What are dependents? Dependents can be a few | | | | taxes can also be claimed as exemptions for the |
| different things. For starters, a person can be | | | | amount of $3,300 per dependent individual. |
| classified as a dependent on your taxes if they are a | | | | Personal exemptions are different. They are claimed |
| child, an adopted child, or any other family member | | | | by your employer on your W-4 withholding forms. |
| that is currently living in your home. Only one person | | | | When you claim personal exemptions, you receive |
| may claim an individual as a dependent when filing | | | | more money in your paycheck each time that you |
| their taxes each year. | | | | are paid by your employer. Keep in mind, though, |
| Dependents are also any individual that you are caring | | | | that claiming many personal exemptions will result in a |
| for. This type of dependent does not necessarily | | | | higher tax bill from the federal government. If your |
| have to live in your home. A person is considered | | | | personal exemption claims are very few, you will |
| dependent when they rely on you to handle their | | | | have to wait until you get your tax return to get |
| expenses, which could be someone in your family | | | | your hands on some of the money you have |
| who needs you to pay for their medical needs. An | | | | worked hard to earn. |
| elderly family member that is being cared for in a | | | | Clearly, dependents and exemptions are two related, |
| nursing home, for example, would still qualify as a | | | | yet altogether different tax terms. Someone who is |
| dependent for federal tax purposes if you are paying | | | | classified as your dependent can also become a tax |
| for the care that they are receiving. | | | | exemption that ultimately lowers the amount of |
| Children who you count as dependents can have | | | | money that you owe to the government. Tax |
| their own job and still qualify to be dependents. | | | | credits, which cut the size of your tax bill even more, |
| Sometimes the income a child earns, such as by | | | | can also be obtained by means of dependents. |