There is a certain amount which you undertake m
Can you be a dependent on taxes with your own business?
March 11th, 2012 
March 11th, 2012 
Posted in 
Tags: Pay Day Home Income
Powered by WordPress | Designed by: Cheap Web Hosting | Thanks to CD Rates, Las Vegas Condos and Conveyancing SolicitorsHome | About Us | Site Map | Terms & Conditions | Privacy Policy | Payday Home Income | Image Fitness | Home Security System
If someone else is supporting you, and claiming you as a dependent, you must be living with them all year, and you have to earn less than the amount for one personal exemption.
Whether you call yourself a business, or just a person earning money, it makes no difference.
Here’s the definition for a dependent child:
1) cannot be claimed by anyone else on their tax return
2) cannot have provided more than 50% of their own support
3) must have lived with the person claiming them for at least 6 months of the year.
4) must be under the age of 19 (or 24 if in school full time)
and here’s the definition of a “qualified relative” dependent
1) must have either lived with the person claiming them the entire 12 months of the year, or be a qualified blood relative
2) cannot have made more than $3,400 of qualified income during the year
3) the person claiming them provides more than 50% of their support
It doesn’t have anything to do with whether you own your own business or not. Take a look at the two tests above to see whether someone else is eligible to claim you as a dependent, or whether you can claim yourself as “independent”.
Your age or status as a dependent does not affect whether or not you own a business for tax purposes. The largest tax hit you will most likely face will be self-employment taxes of (approximately) 15.3% of you profit. If you earn less than $400 (profit…after expenses) you won’t have any S/E tax.
And your status as a business owner does not affect whether you can be claimed as a dependent on your parents’ return.
So keep track of all your income and expenses, and run your business like a business.
This is an excerpt (regarding a “qualifying child” dependent)from the link from the IRS to follow:
Dependent — There are two types of dependents, a qualifying child and a qualifying relative. The five dependency tests — relationship, gross income, support, joint return and citizenship/residency — continue to apply to a qualifying relative. A child who is not a qualifying child might still be a dependent as a qualifying relative. If you are a dependent of another person, you cannot claim any dependents on your own return.
http://www.irs.gov/newsroom/article/0,,id=133298,00.html
This following link is an easier read:
http://taxes.about.com/od/dependents/a/Dependents_2.htm
The following link is in regard to a “qualifying relative” dependent.
http://taxes.about.com/od/dependents/a/Dependents_3.htm#
And the following is the same thing, but from IRS.
Section 152(d)(1) provides, in part, that to be a “qualifying relative” of a taxpayer, an individual must: (A) bear a certain relationship to the taxpayer, (B) have gross income for the calendar year that is less than the exemption amount (as defined in section 151(d)), and (C) derive over one-half of his or her support for the calendar year from the taxpayer. In addition, section 152(d)(1)(D) requires that the individual not be a qualifying child of the taxpayer or of “any other taxpayer” for the taxable year. Section 152(d)(2)(H) provides that a qualifying relative may include an individual who has the same principal place of abode as the taxpayer and who is a member of the taxpayer’s household.
Here is the link the above information came from:
http://www.irs.gov/irb/2008-02_IRB/ar14.html
As you can maybe see now, owning your own business has nothing to do with whether you are a dependent or not. If you are under 18, you are likely a dependent, but there are quite a few rules. Something that should be so simple in the tax code often winds up being far more complicated than it should be or needs to be!
If your mom or dad don’t claim you, then you would claim your own dependency exemption. It is usually FAR more financially beneficial for the parents to take the exemption, than the younger person.
I hope I understood your question properly and that this helps!
You can still be a dependent with your own business.
One of the requirements to be a dependent is that you do NOT provide over half of your own support. If you provide over half of your own support, from your own business or from other sources, then you are not a dependent.