Claiming Dependents for Head of Household and the EIC
Tax Law Update: The personal exemption has been eliminated starting with 2018 returns, in favor of a higher standard deduction. So claiming a dependent no longer gives you a valuable tax break because of the dependent’s personal exemption. But other tax breaks associated with dependents are still in effect.
First, the tax code offers a special filing status if you have a dependent and are single or are otherwise not living with a spouse. This is the head of household filing status, and it’s a real no-brainer if you qualify. Bottom line, you’ll owe less in taxes.
And if you qualify for the Earned Income Credit (EIC), having a dependent child increases your credit amount.
Let’s take a look at the rules for each of these tax breaks.
Filing as Head of Household
Filing as head of household gives you a higher standard deduction and lower tax rate than filing as a single person or as married filing separately, so naturally some qualifications must be met:
- You must be single or have been separated for at least the last half the year.
- You must have a qualifying dependent living with you at least half the year (unless it’s a parent – see below).
- You must have paid more than half the maintenance costs for the home where you and the dependent lived.
The qualifying dependent can be a child or relative. And if it’s your parent, he or she doesn’t have to live with you for you to claim the head of household status. See Claiming a Parent as a Dependent.
When you do your taxes with 1040.com, filing as head of household is a simple matter of selecting the filing status on our Name & Address screen. Then just add a qualifying dependent, using the Dependent screen.
The Earned Income Credit
The Earned Income Credit (EIC) is especially beneficial for lower-income taxpayers. It’s popular because it’s refundable, meaning it can give you a refund even if you weren't due one based on the taxes you paid throughout the year. You can qualify if you’re single or married, with or without dependent children. You just have to meet income and certain other requirements.
Note that it’s only dependent children who can increase your EIC amount. The child has to be younger than age 19 at the end of the year, or age 24 if a student, or can be any age if disabled. Other dependents have no effect on EIC, but they can still qualify you for filing as head of household.
Having a dependent child affects EIC in two ways: by letting you earn more and still qualify for the credit, and by increasing the amount of credit you get.
First, the higher income levels (tax year 2018):
- First, if you have no qualifying dependent children, the maximum AGI you can have to claim the EIC is $15,270 if you’re a single filer. This includes those who are filing as single, head of household and qualifying widow(er) with dependent child. If you’re married filing joint, the AGI cap is $20,950.
- If you have only one qualifying child, the AGI cap is $40,320 for single filers, or $46,010 if married filing jointly.
- If you claim two qualifying children, the AGI cap is $45,802 for single filers, or $51,492 if married filing jointly.
- If you claim three or more qualifying children, the AGI cap is $49,194 for single filers, or $54,884 if married filing jointly.
Now, the increased credit amounts (tax year 2018):
- $519 with no qualifying children
- $3,461 with one qualifying child
- $5,716 with two qualifying children
- $6,431 with three or more qualifying children
Note: These are the maximum credit amounts. As your income goes up and gets closer to the relevant maximum, the credit decreases.
We automatically add the EIC to your 1040.com return and figure out the right amount for you when you qualify. To make sure you get the maximum amount you qualify for, just make sure you add any qualifying children with the Dependent screen. Other than that, also check Form 8867 – Earned Income Credit Checklist, to see if any of the special situations apply.