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How to Itemize Taxes When Claiming Dependents

by | Jun 1, 2024 | 2024, Accounting, Tax Credits and Deductions, Tax planning | 1 comment

Claiming dependents and itemizing deductions is an efficient approach to reducing your income taxes. Each dependent you claim reduces your taxable income by one exemption for tax years earlier than 2018 and enables you to claim a tax credit for tax years beginning in 2018 and beyond. In this article, you’ll get a step-by-step guide to using itemized deductions for dependents.

With the changes in tax law that occurred in 2018, claiming dependents and itemizing deductions is a bit different, but still a good strategy to save money on your taxes. Prior to 2018, each dependent you claimed could lower your taxable income by the amount of one exemption deduction. For 2017, the figure is $4,050. You may also have been entitled for other credits, like the Child Tax Credit and the Additional Child Tax Credit.

Since 2018, for each eligible dependent you claim, you can get up to a $2,000 Child Tax Credit or a $500 Other Dependent Tax Credit, both of which are generally larger than before 2018. Whether you receive the Child Tax Credit or the Other dependent Tax Credit is determined by the kind of dependent and what requirements have been met. Because this is a credit, it can directly reduce the amount of tax owed rather than merely lowering your taxable income, like an exemption or deduction does.

If you itemize your deductions, you will lose the Standard Deduction, but you may select the one that delivers the biggest tax savings. When itemizing, you can deduct a variety of costs, including medical and dental bills, mortgage interest, state and local taxes, and charitable contributions.

Here are the steps to itemizing your deductions:

  1. File your taxes using form 1040
  2. On the first page of your Form 1040, list all of the dependents you’re claiming. You will need to provide each dependent’s full name, Social Security number, and relation to you. On the second page of your tax return, you can claim an exemption deduction as well as any other eligible child credit (tax years 2017 and prior); or an additional child/dependent tax credit (tax years beginning in 2018) for each qualifying dependent you name.
  3. Use Schedule A to list your deductions. The guidelines for Schedule A list all of the costs that can be itemized. The schedule asks you to record each spending category. When filling out Schedule A, keep in mind that the amount you may deduct for each type of cost may be limited.
  4. Transfer all itemized deductions to your Form 1040 tax return. This amount is deducted from your adjusted gross income, in addition to any other qualified deductions, to determine your taxable income. The final income amount will be the sum that is subject to income tax.
  5. After determining the amount of tax on your taxable income, you may apply any tax credits that you are eligible for. This includes the Child Tax Credit and the Other Dependent Tax Credit, which you may claim on your return.

If you need assistance, remember that your partners at PSA CPA are just a phone call or email away! Contact us at 301-879-0600 or contact@psacpa.com

1 Comment

  1. I’m a freelancer; what deductions can I claim?

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