Can your tax clients claim dependents who reside in Mexico?

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Original article written by LatinoTaxPro.org

The Tax Cuts & Jobs Act has created massive changes across the Internal Revenue Code. One of the most impactful of these changes is the reduction of the personal exemption to $0. In previous years, the personal exemption reduced taxable income which in turn reduced the amount of tax owed. As more personal exemptions are made, less taxable income is generated, and thus less tax is paid. An exemption was allowed for any qualifying dependent, including those who lived in Mexico. Now that the exemption amount is $0 however, can you still claim dependents in Mexico?

Yes. Although the exemption amount is zero, including qualifying dependents on the tax return may make taxpayers eligible for other tax benefits.

Other Dependent Credit

A new non-refundable credit of up to $500 is available for each qualifying dependent other than children who can be claimed for the child tax credit. The qualifying dependent must be a U.S. citizen, a U.S. national, or a U.S. resident alien.

This Means That…. Your dependents in Mexico will NOT be able to claim this credit. They need to live in your household in the United States for at least half of the year.


Child Tax Credit

For 2018, the maximum credit increased to $2,000 per qualifying child. Up to $1,400 of the credit can be refundable for each qualifying child as the additional child tax credit. To qualify for this credit, the child must be a U.S. citizen, a U.S. national, or a U.S. resident alien. Beginning in 2018, the child must also have a Social Security Number.

This Means That…. Your dependents in Mexico will NOT be able to claim this credit. They need to live in your household in the United States and have a valid Social Security Number.


Head of Household Filing Status

To be eligible to claim HOH filing status, a taxpayer must:

  • Be unmarried or “considered unmarried” on the last day of the year.
  • Have paid more than half of the cost of keeping up a home for the year.
  • Have a qualifying person live in the taxpayer’s home for more than half the year

However, if the qualifying person is the taxpayer’s dependent parent, he or she does not have to live with the taxpayer. If you are claiming your parents in Mexico for the purposes of qualifying for the HOH filing status, you must:

  • Provide over 50% of their support
  • Make sure they earn less than $4,150 during the year
  • Make sure they have a valid active ITIN

This Means That…. You can claim your parents who live in Mexico.

 

State Tax Returns

Many states did not conform to the new federal tax law changes. For example, in California, you may still claim an exemption credit for a qualifying dependent who lives in Mexico.

This Means That…. You may still claim a dependent in Mexico if your state allows it, but make sure you can prove that you provide over half of their support and that they have a valid ITIN.

 

Must Have a Valid Active ITIN

If you are claiming a dependent from Mexico, make sure they have a valid active ITIN. All ITINs not used on a federal tax return at least once in the last three years have expired. Additionally, all ITINs with middle digits of 73, 74, 75, 76, 77, 81, or 82 have expired. They ITIN needs to be renewed to be included in a 2018 tax return.