Dependent Income Limits

[Chowdahead]

I am looking at the 1040 Express Answers book sent to me by ATX and in the table titled "Who Must File a Return in 2010", the Filing Status of "Single, if may be claimed on another return" is listed as $5,400 +$300.

1. What is the $300?

2. What is the income limit for someone being claimed as a dependent on a filer's return? I have lots of parents who make $20K-$30K and have teenage kids who made $6-7k working part-time. Is there a limit for the exemption or Earned Income Credit?

[mcb39]

Up to age 19, it doesn't matter unless child is contributing more than half of his own support. Over age 19 and not a student, income limit is $3650.

Single person Under 65 whose gross income is at least $9350; Over 65 is $10750.

Read the little explaination notes at the bottom of the page that you are looking at. It differentiates between Unearned (interest and dividends) and Earned Income.

[Pacun]

I am just giving you more information but MCB39 already answered your questions.

Answer to question 2.- Let's say you and your wife earned 40K in 2010 and you have 3 kids, ages 12, 21 (who is full-time student), and 33 (who is permanently disabled) As long as none of them provide 50% to his her own support and live with you, you can claim them and claim EIC. This will be true even if 12 year old child supports both brothers but not more than 50% of his own support. Another example: This will also be true even if the 12 year old (or any of children) made $4 million while staring a movie, as long you put that money on the side for his college, retirement or simply have it under the mattres. I am hoping someone will be interested on this and comment.

Answer to question 1.- a person who is eligible to be claimed as a dependent on another person’s return will have a 2010 standard deduction limited to the greater of $950 (the “minimum” standard deduction) or the taxpayer’s earned income plus $300, not to the exceed the normal maximum single standard deduction of $5,700).

Example: Mavis Williams, age 17, is claimed as a dependent on her parent’s return. Her 2010 earnings consist of $1,200 interest and $400 wages from a paper route. Mavis’s 2010 standard deduction is $950 (the minimum standard deduction).

Example: Assume the same facts as the previous example, except that Mavis has $980 itemized deductions

in 2010. Mavis would itemize and deduct $980.

Example: Assume the same facts as the previous example, except that Mavis’s paper route earnings

were $1,300. In this case, the standard deduction would be $1,600 (the $1,300 earned income from

the paper route plus $300). If paper route earnings were $5,980, the standard deduction would be limited

to $5,700 (the maximum standard deduction for a single person in 2010).

[taxguy057]

I am just giving you more information but MCB39 already answered your questions.

Answer to question 2.- Let's say you and your wife earned 40K in 2010 and you have 3 kids, ages 12, 21 (who is full-time student), and 33 (who is permanently disabled) As long as none of them provide 50% to his her own support and live with you, you can claim them and claim EIC. This will be true even if 12 year old child supports both brothers but not more than 50% of his own support. Another example: This will also be true even if the 12 year old (or any of children) made $4 million while staring a movie, as long you put that money on the side for his college, retirement or simply have it under the mattres. I am hoping someone will be interested on this and comment.

Answer to question 1.- a person who is eligible to be claimed as a dependent on another person’s return will have a 2010 standard deduction limited to the greater of $950 (the “minimum” standard deduction) or the taxpayer’s earned income plus $300, not to the exceed the normal maximum single standard deduction of $5,700).

Example: Mavis Williams, age 17, is claimed as a dependent on her parent’s return. Her 2010 earnings consist of $1,200 interest and $400 wages from a paper route. Mavis’s 2010 standard deduction is $950 (the minimum standard deduction).

Example: Assume the same facts as the previous example, except that Mavis has $980 itemized deductions

in 2010. Mavis would itemize and deduct $980.

Example: Assume the same facts as the previous example, except that Mavis’s paper route earnings

were $1,300. In this case, the standard deduction would be $1,600 (the $1,300 earned income from

the paper route plus $300). If paper route earnings were $5,980, the standard deduction would be limited

to $5,700 (the maximum standard deduction for a single person in 2010).

So lets stretch this a little further.... what will the parents claim on their return for standard deduction or itemized deduction? Will the amount they claim on the return be reduced as well??