Claiming your child as a dependent is an excellent way of reducing your taxable income so you pay less money to the IRS. But what if you have no taxable income? For example, can a stay-at-home mom claim a child on taxes? And is it worth doing so?
Well, everything depends on your situation. Under some circumstances, it is best for you to claim your child on your taxes even in the absence of taxable income. However, you need to remember that not every child of yours will qualify as a dependent.
So, it helps to understand why it may be worth filing taxes and claiming your child as a dependent when you have no taxable income. Also, you should learn how to determine if your child is a dependent.
Read More: Tax Deadlines in 2022 for 2021 Tax Year
What Constitutes Taxable Income?
There is a difference between gross income and taxable income. The former refers to all income you obtained during the tax year from all sources, including dividends, wages, fringe benefits tips, real estate income and retirement benefits, among others. And the latter refers to the income amount that is subject to taxation. To arrive at your taxable income, you must first subtract the permitted deductions.
Below are some of the circumstances under which you may not have taxable income.
- When you only get income that may not be subject to taxation at all, you will not have taxable income. These include some inheritances, child support payments and welfare benefits, among others. They are usually excluded when calculating your tax liability.
- If you earn a low income, you could end up with zero taxable income. For example, if you earned $12,550 in the 2021 tax year, you would not have any tax liability if you claimed the standard deduction for singles. Your tax liability would have gone down to zero after deductions.
- When you earn a decent income and itemize your deductions, if you claim enough of them, you could decrease your taxable income to zero.
- If you don’t work at all and have no other sources of income, you won’t be subjected to taxation.
When Can You File Taxes If You Didn’t Work and Have a Child?
Can you claim your kid if you don't work? And if you have no income, can you get a tax refund? The answer to both questions is yes.
Generally, you cannot claim a tax refund without filing taxes, and the IRS expects you to do so even when you have no income. If you don’t file on time, you can still file an original return within three years of its due date.
And if you are wondering, “What happens if I don't claim my child on taxes?” Well, it depends. If you have no taxable income, you risk losing the refund owed to you from the credits you qualify for since they depend on the number of dependents you have. And if you have taxable income, you will pay more than you should to the IRS.
Some of the credits you may qualify for when you claim your children include:
- Earned income tax credit (EITC)
- Child and dependent care credit
- Credit for other dependents
- Recovery rebate credits
- Education credits
Read More: Tips for Filing Multiple Year Tax Returns
Who Is a Qualifying Child?
Not every child you have qualifies as a dependent. Below are some basic criteria your child must meet if you are to claim them on your taxes as a qualifying dependent.
- Your child must have a valid Social Security Number (SSN)
- Your child must have a legally acceptable relationship with you. The IRS accepts biological and step-children, adopted children and foster children. You can also include your siblings, half-siblings and step-siblings. In addition, your qualifying children could be related to you as your grandchildren, nieces or nephews.
- Your child must be younger than you or your spouse and under the age of 19, or under 24 years and a full-time student in an IRS-acceptable institution or course for at least five months of the year. However, any adult child regardless of age could be your dependent if they have a total and permanent disability in the tax year you claim them.
- Your child should live with you at home in the U.S. for at least six months of the year unless they are exempt from doing so. But if your child’s absence is due to schooling, military service, detention in a juvenile facility, illness or kidnapping, that time away still counts in your favor.
- Your child cannot be claimed as another taxpayer’s dependent unless that person is your spouse with whom you file a joint return. However, if you live apart from your spouse, they may be allowed to claim your child as a dependent for Earned Income Tax Credit. And in that case, you would need to sign Form 8832 to allow the noncustodial parent to claim your child as a dependent. It is also the form you would have to complete to revoke their claim. There should be a form for every qualifying child.
Once you have gathered all the information you need even if you don’t have an income, you can claim your children on taxes by filing Form 1040 or 1040-SR provided the kids qualify as dependents.
However, you may need to attach various schedule forms, depending on your income earning situation and the credits you intend to claim. So, find out the correct forms to complete to ensure you get your refund.
- Corporate Finance Institute: Gross Income
- IRS.Gov: What is Taxable and Nontaxable Income?
- Corporate Finance Institute: Taxable Income
- IRS.Gov: IRS provides tax inflation adjustments for tax year 2021
- IRS.Gov: Don’t Lose Your Refund by Not Filing
- IRS.Gov: Qualifying Child Rules
- IRS.Gov: Form 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent
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