Much attention has been given lately to the Child Tax Credit and its advance payments. But taxpayers might be able to claim another credit if their dependents don't qualify for the CTC.

Unlike the Child Tax Credit, the credit for other dependents is non-refundable, meaning it can reduce or even eliminate a taxpayer’s tax bill, but can’t be refunded if part of the credit amount is left over.

What dependents qualify?

The IRS limits the maximum amount for each qualifying dependent at $500, and they must fall under one of the following categories:

• Dependents who are age 17 or older.
• Dependents who have individual taxpayer identification numbers.
• Dependent parents or other qualifying relatives supported by the taxpayer.
• Dependents living with the taxpayer who aren't related to the taxpayer.

The credit for other dependents phases out when the taxpayer’s income is more than $200,000. For married couples filing jointly, the phaseout starts at $400,000.

Which taxpayers can claim the credit?

Taxpayers can claim the credit for other dependents if:

• They claim the person as a dependent on the taxpayer's return.
• They cannot use the dependent to claim the child tax credit or additional child tax credit.
• The dependent is a U.S. citizen, national or resident alien.

Depending on the circumstances, a taxpayer might be able to claim the child and dependent care credit and the earned income credit along with the credit for other dependents, all on the same return.

The IRS website, IRS.gov, has helpful resources that can point a taxpayer in the right direction on claiming the credit for other dependents. These include the IRS Interactive Tax Assistant and the "Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents?" webpage.

In addition, see Publication 501, Dependents, Standard Deduction and Filing Information.

Source: Tax Tip 2022-12