If you're a new parent, you may be wondering about the dependent tax deduction. It's so valuable that some expectant mothers whose due date fell at the beginning of the year have induced labor in late December in order to qualify for the dependent tax deduction!
This provision of the U.S. tax code can indeed reduce the amount of taxes you owe, if you qualify. But be careful: a person can only be named a dependent on one tax return. Here's how the dependent tax deduction works.
You can claim the dependent tax deduction for a person who is a qualifying child or relative and has lived with you for more than half of the tax year, with some exceptions. The person can't have provided more than half of his or her own financial support for the year in question.
The child must be younger than 19 at the end of the year, or a full-time student for at least 5 months of the year and younger than 24. Children who are permanently and totally disabled at any time during the year qualify regardless of age.
For more information on the dependent tax deduction and credits, see IRS Publication 501.
Sources: Internal Revenue Service and H&R Block
