Buffalo, NY (WBEN) - Not only has the COVID pandemic put pressure on many Americans' bank accounts and lives in general, it's making our annual income tax returns a bit more complex as well.
The layers of stimulus payments that have been, and will be, issued are forcing many families to make a difficult decision of whether to claim their adult children as dependents or not.
How you answer that question can make a big difference on your tax return and those of any college-age children.
The question is easy, but the answer is somewhat more complicated according to Esther Gulyas, 'The Tax Lady' at EG Tax.
Gulyas says if your child hasn't made much money, and you're getting the full American Opportunity tax credit, then you should claim the child. "You would claim the child if you would get the full credit and the child was not self-sufficient," says Gulyas.
"Let's say you have a child who made $10,000, and maybe the parent because of a scholarship there isn't much tax credit or the parent's income is so high it's phased out, if the child claims himself, he'd be entitled to the reconciliation of stimulus payments and be eligible for the $1,400," explains Gulyas. She says if the child is working and has collected unemployment, take a closer look at whether to claim the child.
Gulyas says if a parent chooses to not to claim the child, "next year if there's no stimulus, the parent can go back to claiming the child again if the stimulus won't go away but it's so much more difficult to make that decision because of all the stimulus money."
Gulyas says the American Rescue Act also makes the first $10,200 of unemployment benefits last year tax-free, and that may also cause people who have already filed go back and amend the returns to take that money off as taxable income.
You can hear Ester Gulyas and the experts from EG Tax each Saturday afternoon at 3pm on NewsRadio930 WBEN.
