Dependents and taxes

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For the 2024 tax year, the Child Tax Credit provides financial relief to eligible families with children under 17 years old. The credit helps reduce taxes owed and may provide a refund in some cases.

Here are the key details for 2024:

1. Amount:
  - The credit is up to $2,000 per child.
  - Up to $1,700 of the credit is refundable, meaning if the credit exceeds your tax liability, you may receive the difference as a refund (subject to income limits).

2. Eligibility Requirements:
  - The child must be under 17 at the end of the year (i.e., under 17 on December 31, 2024).
  - The child must be a U.S. citizen, national, or resident alien.
  - The child must be claimed as a dependent.
  - The child must have **lived with the taxpayer for more than half the year.

3. Disabled Children:
  - There is no age limit for children with disabilities. A child who is permanently and totally disabled can qualify for the Child Tax Credit, regardless of age.
  
4. Income Limits:
  - The credit begins to phase out for single taxpayers with an adjusted gross income (AGI) over $200,000 and for married couples filing jointly over $400,000. The credit is reduced by $50 for every $1,000 of AGI over these thresholds. The credit also has a phase in which starts is 15% of earned income over 2,500.

This credit aims to provide tax relief to families and help with the financial costs of raising children, including children with disabilities. 

The lower limit of the child tax credit phase in starts at 2500 and is 15% of all income over that. The upper limit phase out starts at 200,000 for HOH and 400,000 for MFJ.

The Dependent Care Credit is a tax benefit designed to help working parents or caregivers offset the cost of care for dependents, such as children under 13 or individuals who are physically or mentally incapable of self-care. To claim the credit, the taxpayer must have earned income and the care must be provided to enable the taxpayer (and their spouse, if filing jointly) to work or look for work.

Who can claim the credit:
- Parents or caregivers who pay for care services while they work or look for work.
- The taxpayer must have earned income, and both spouses (if married) must work, unless one is a full-time student or disabled.

Who can provide the care:
- Care can be provided by a licensed daycare provider, babysitter, or a daycare center. However, the provider cannot be a relative under certain conditions, such as a parent of the child or a dependent of the taxpayer. 

Payments to relatives or dependents - The care provider can't be your spouse, the parent of your qualifying individual if your qualifying individual is your child and under age 13, your child who is under the age of 19, or a dependent whom you or your spouse may claim on your return. 

IRS Article for Child and dependent Care credit

The Earned Income Tax Credit (EITC) is a tax benefit for low to moderate-income individuals and families, designed to reduce the amount of taxes owed and possibly provide a refund. Eligibility depends on factors such as income, filing status, and whether the taxpayer has a qualifying child or meets specific age requirements. The amount of the credit varies based on income and the number of qualifying children, with larger credits available for taxpayers with more children. The EITC aims to encourage and reward work while helping individuals and families with lower incomes.

A child must meet these criteria to be a qualifying child:

1. Have a valid Social Security number.
2. Pass all four tests for a qualifying child.
3. Not be claimed as a qualifying child by more than one person.

4 tests for qualifying child:

1. **Relationship**: The child must be your son, daughter, stepchild, foster child, sibling, or a descendant of one of these (e.g., your grandchild).
2. **Age**: The child must be under age 19, under age 24 and a full-time student, or any age if permanently disabled.
3. **Residency**: The child must live with you in the U.S. for more than half the year.
4. **Support**: The child must not provide more than half of their own support during the year.

The **Credit for Other Dependents** provides a nonrefundable credit of up to **$500 per dependent** who does not qualify for the Child Tax Credit. This includes:

- **Disabled persons**: Individuals who are permanently disabled, regardless of age, can qualify as long as they are claimed as a dependent.
- **Older adults**: Dependents who are elderly or senior citizens, such as parents or relatives who live with the taxpayer, may also qualify.

To claim the credit, the dependent must be a U.S. citizen, national, or resident alien, and the taxpayer must meet specific income limits. The credit helps reduce the taxpayer's liability but does not result in a refund. It phases out for higher-income taxpayers, similar to the Child Tax Credit.

 You have a household employee if you hired someone to do household work and that worker is your employee. The worker is your employee if you can control not only what work is done but how it is done. If the worker is your employee, then it does not matter whether the work is full time or part time nor that you hired the worker through an agency or from a list provided by an agency or an association. It also does not matter whether you pay the worker on an hourly, daily, weekly or by the job.  

 If you hire someone to work in your home and pay them above a certain threshold, you may be required to pay employment taxes, including:

1. Social Security and Medicare Taxes: You must pay the employer's portion of these taxes and withhold the employee's portion from their wages.
2. Federal Unemployment Tax (FUTA): You may need to pay FUTA taxes if your total wages to the employee exceed a specified annual threshold.
3. Reporting and Filing: You are required to report wages and employment taxes on forms like Schedule H (Form 1040) when you file your tax return. You may also need to provide a W-2 to your household employee.

Household employees are typically not considered independent contractors, and employers must comply with these tax requirements based on the wages paid and the employment relationship.

IRS Publication for household employees