Dependent
What it is:
A dependent relies on someone else for most or all of his or her financial support.
How it works/Example:
In general, dependents are exemptions that reduce a taxpayer's taxable income. Taxpayers typically can take an exemption for each of his or her dependents. Spouses are not considered dependents from a tax perspective.
To claim someone as a dependent, the dependent must be a U.S. citizen, a U.S. resident alien, a U.S. national resident, or a resident of Canada or Mexico for some part of the year. Adopted children have some special exceptions to this rule. The filer must provide Social Security numbers for all dependents.
People who are dependents on another person's tax return may still have to file their own tax returns. This depends on how much they earn, how old they are and other factors. Dependents cannot claim any personal exemptions on their tax returns.
Why it matters:
The presence and number of dependents affect a taxpayer's tax liabilities and eligibility for public assistance programs such as welfare and food stamps. As mentioned, dependents increase the number of exemptions a taxypayer receives.