Family is so important that our love for them remains strong whether they live near or far from us. That’s why we’re always ready to help them, wherever they are. Sometimes we send them big boxes filled with gifts and keepsakes for a special occasion during the year or just because we feel like it. But what if your help goes beyond sending a few boxes of gifts a year?
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Many are willing to provide substantial financial assistance to their relatives living abroad. If that’s your case, now that tax time has come, you’re probably wondering: Am I eligible for a tax break if I help my family members living abroad financially?
For answers to this question and anything else related to your tax situation, TurboTax will ask you simple questions and, based on your answers, give you the tax credits and credits you qualify for. TurboTax Live tax experts are also available year round in English and Spanish and can even view, sign and file your tax return. fully hand over your taxes to them.
While TurboTax gives you the tax deductions and credits you qualify for, you can see below what you qualify for.
What are the basic requirements?
It’s true that the IRS may allow taxpayers to claim family members living abroad who they support financially, but that doesn’t mean you can automatically deduct any financial assistance you grant them. As with any other tax deduction, there are requirements that come with the tax benefit. Especially after the Tax Cuts and Jobs Act was passed by Congress in late 2017, which changed the tax breaks for dependents.
There are two ways to claim a dependent: Eligible Child and Eligible Family Member. The former, Eligible Child, probably won’t be an option if your dependent child doesn’t live with you, as the dependent child must live with taxpayers for more than half of the year to be eligible. On the other hand, if you financially support your relatives living abroad, you may be able to claim them as eligible relatives if you meet certain requirements.
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What are those requirements? Here are some:
- You can only claim a family member who supports you financially as a dependent if they are a US citizen, a US citizen, a US resident alien, or a resident of Canada or Mexico. So if the family member you support abroad lives in a country other than Canada or Mexico and they are not a US citizen, US citizen, or US resident alien, you cannot claim them as your eligible relatives on your tax return.
- They must also pass the Relationship Test. What does that mean? Well, they must be one of these: your child, a legally adopted child, stepchild, foster child, a descendant of one of them (e.g. your grandchild), your brother, sister, half-brother, half-sister, stepbrother, stepsister, your father, mother , grandparent or other direct ancestor, but not a foster parent, your stepfather or stepmother, a son or daughter of your brother or sister, a son or daughter of your half brother or half sister, a brother or sister of your father or mother, your son-in-law, daughter-in-law , father-in-law, mother-in-law, brother-in-law or sister-in-law.
- The taxable gross income of the family member you support must be less than $4,300 in 2020 (this amount will increase for future tax years).
- As a taxpayer, you must have provided more than half of the family member’s livelihood during the tax year.
Also keep in mind that your family members will need a tax identification number to claim them. That can be a Social Security Number or an ITIN (Individual Tax Identification Number), which you can request by submitting a W-7 form.
What are the tax benefits?
While it is true that you may be able to claim your family members living abroad as dependents, claiming an eligible family member will not qualify you for other benefits associated with having a dependent child such as filing as head of household and some other tax credits related to dependent children such as the Earned Income Rebate and the Child Rebate. The main tax benefit to being able to claim a family member as a dependent was the dependent exemption which was up to $4,050 in the years prior to the tax reform. However, the tax reform abolished the dependent exemption for tax years 2018-2025.
Now you can claim a new credit, the Other Dependent Credit (ODC) up to $500 for undependent children. In contrast to the child tax credit, you can claim the other dependent deduction if your dependent is your child aged 17 and older, your child with an ITIN or other family members. Under the tax reform, your dependent child needs a social security number and not an ITIN to be able to claim the child tax credit.
If you need to file a tax return for a tax year before 2018, you may still be able to claim the dependent family member who supported you and claim a dependent exemption or deduction. Remember, if you want to claim a missed credit or deduction, you can file it within 3 years of the return due date. But whether you can claim a tax break for the financial aid you give to your family living abroad or not, nothing can take away the joy and satisfaction of helping them.
If you have any questions, you can connect live with a . via one-way video TurboTax Live tax expert with an average of 12 years of experience to get your questions answered. TurboTax Live tax experts are available year round in English and Spanish to answer your questions and view, sign and file your return. You can also hand over your taxes in full to a TurboTax Live tax expert and have them do it from start to finish. All from the comfort of your home.