1040 taxes - exemption for stepson

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ps56k
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1040 taxes - exemption for stepson

Post by ps56k » Fri Feb 28, 2014 9:47 pm

I have a general 1040 tax question for my wife's sister... regarding exemptions...

In general - what do you achive on your 1040 when you claim a "dependent" - ie - son -
Is it just the $3,900 "deduction"- or - are there other things to be considered ?

Basically - my wife's sister and the stepson's mother were trading years for claiming the son as a dependent,
and was just wondering what you gain or loose overall with claiming the extra exemption ?

Not sure about other expenses being paid out -
health care, community college tuition, education loans, etc.
Last edited by ps56k on Mon Mar 03, 2014 12:33 pm, edited 1 time in total.

pshonore
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Re: 1040 taxes - exemption for stepson

Post by pshonore » Fri Feb 28, 2014 10:34 pm

Lets use the right words - its a $3900 deduction, not a credit against tax. Depending on age (less than 17 at end of tax year) would net a $1000 Child Tax credit, the ability to claim an Education credit, Dependent Care credit, Earned Income credit, etc.. The are many other requirements for all those which are outlined in Pub 17.

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ps56k
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Re: 1040 taxes - exemption for stepson

Post by ps56k » Sat Mar 01, 2014 12:05 am

he's over 17 - going to be 21 -
tnx for the terminology admonishment, correction, and the basic answer of RTFM -

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damjam
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Re: 1040 taxes - exemption for stepson

Post by damjam » Sat Mar 01, 2014 2:55 am

ps56k wrote:he's over 17 - going to be 21 -
tnx for the terminology admonishment, correction, and the basic answer of RTFM -

I think the sarcasm is uncalled for.

The answer you are seeking is greatly dependent on the specific facts of the situation.

A general answer to your question is that there are at least 6 things associated with having a child:
1.Head of Household filing status
2.Dependency Exemption
3.Child Tax Credit (including the refundable Child Tax Credit)
4.Child and Dependent Care Credit
5.Earned Income Credit
6.Education Credits
All 6 have their own requirements. Most have age requirements if the child is not disabled.

Since the child was 20 for 2013, he would have had to been a full time student, or had taxable income less than $3,900 for HoH status to come into play. Similar requirements for the EIC and dependency exemption. He would have been too old for CTC or the CDC (unless disabled for CDC).

jebmke
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Re: 1040 taxes - exemption for stepson

Post by jebmke » Sat Mar 01, 2014 7:43 am

damjam wrote:I think the sarcasm is uncalled for.

The answer you are seeking is greatly dependent on the specific facts of the situation.

Indeed. Those of us who prepare individual taxes for others know that filing status and exemptions can sometimes be the most complicated part of a standard individual return. Further, as we are right in the middle of tax season, when someone asks a question without expending much (any) effort to find the answer in the myriad of resources available from the IRS web site, we often direct them there for further clarification. I run a moderately large TaxAide site. We do about 500 returns during the season (Feb 1-April 15). My preparers know that I am unlikely to answer their question unless they first tell me what they learned by researching it in the tax publications.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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ps56k
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Re: 1040 taxes - exemption for stepson

Post by ps56k » Sat Mar 01, 2014 12:07 pm

damjam wrote:The answer you are seeking is greatly dependent on the specific facts of the situation.
A general answer to your question is that there are at least 6 things associated with having a child.

Got me thinking -
so I took some time, and entered some general numbers into TurboTax just to see all the possible entries,
and the resulting effects on the tax due....

Made it pretty much middle class - MFJ - W2 with some INT, DIV, etc...
with a small amount of everything entered... and stepson going to local community college vs 4yr.

I learned a few things about the entries that we have personally never encountered...
Child Care - didn't really apply here
EIC - had too much investment income (over $3,300) and too much income (over $43k)
Education Credit - yup - got this one for around $2k along with American Opportunity Credit

SO - in the end - I basically had a total tax due of $774
and then without the son "exemption" - the total tax due was $3,470
Yielding a difference/savings of about $2,696 with the extra exemption...

cherijoh
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Re: 1040 taxes - exemption for stepson

Post by cherijoh » Sat Mar 01, 2014 3:15 pm

ps56k wrote:he's over 17 - going to be 21 -
tnx for the terminology admonishment, correction, and the basic answer of RTFM -


There is a huge difference between a deduction and a tax credit. The deduction is subtracted from your taxable income, while then reduces your taxes by your marginal tax bracket. A tax credit is subtracted from your tax bill. So it wasn't a "terminology admonishment" - it is likely several thousand dollars difference.

Don't be surprised if your next post gets ignored, since who wants to reply to someone who is extremely snarky?

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Re: 1040 taxes - exemption for stepson

Post by Calm Man » Sat Mar 01, 2014 10:31 pm

cherijoh wrote:
ps56k wrote:he's over 17 - going to be 21 -
tnx for the terminology admonishment, correction, and the basic answer of RTFM -


There is a huge difference between a deduction and a tax credit. The deduction is subtracted from your taxable income, while then reduces your taxes by your marginal tax bracket. A tax credit is subtracted from your tax bill. So it wasn't a "terminology admonishment" - it is likely several thousand dollars difference.

Don't be surprised if your next post gets ignored, since who wants to reply to someone who is extremely snarky?


I think it is a testimony to the good intentions of people on this forum that any attention has been given to the OP after his hostile response to the first commenter who was sincerely trying to help.

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ps56k
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Re: 1040 taxes - exemption for stepson

Post by ps56k » Mon Mar 03, 2014 12:43 pm

After all was said and done - I tried to show my wife's sister that the $3,900 deduction was only resulting in an actual deduction equal to her tax bracket - which was around 13%. So, the real amount they were fighting over - based upon who got to take this year's dedcuton - was $3,900 x 13% = $507 deduction.

Since there are no other credits to be taken regarding education or other items past 1040 line 46,
which would have resulted in about a $2,600 credit,
the only tug of war, is for this year's exemption... and deduction...

Is it worth all the mental anquish.... to me, no - her choice may be different.

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damjam
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Re: 1040 taxes - exemption for stepson

Post by damjam » Wed Mar 05, 2014 2:32 pm

ps56k wrote:After all was said and done - I tried to show my wife's sister that the $3,900 deduction was only resulting in an actual deduction equal to her tax bracket - which was around 13%. So, the real amount they were fighting over - based upon who got to take this year's dedcuton - was $3,900 x 13% = $507 deduction.

There is no 13% tax bracket.
13% may be the effective rate.
2013 tax brackets

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