CBO examines the tax benefit of having dependents under current law in 2019 and 2026 and analyzes how three policy options that would simplify dependent-related tax provisions would affect that benefit.
Several provisions of the individual income tax code reduce taxes for people with dependents—generally, people who live with and are financially supported by the taxpayer. In this report, CBO examines the tax benefit (that is, the reduction in tax liability after refunds from credits are accounted for) of having dependents and the distribution of that benefit under current law in 2019 and in 2026, after certain provisions of the 2017 tax act expire.
Major Provisions That Affect Taxpayers With Dependents. For both 2019 and 2026, single taxpayers with dependents will typically be able to file as a head of household, which provides a larger standard deduction than the single filing status and results in a greater share of the taxpayer’s income being taxed at lower rates. Although exemptions for dependents are not allowed for 2019, taxpayers with dependents may be eligible for one or more of several credits—the earned income tax credit, the child tax credit (for children younger than 17), and the credit for other dependents. In 2026, after certain provisions now in place expire, the child tax credit will be smaller, the credit for other dependents will no longer be available, and dependent exemptions will once again be allowed.
Factors That Contribute to the Tax Benefit of Having Dependents. The tax benefit that a taxpayer receives is based on the dependent’s age and relationship to the taxpayer, the taxpayer’s income and marital status, and other eligibility requirements. In general, the tax benefit of children younger than 17 is greater than the tax benefit of older children or other relatives.
Value of the Tax Benefit of Having Dependents. The tax benefit per dependent in 2019 is estimated to be $2,300 ($3,800 per family), on average. The average benefit per dependent varies across the income distribution and within income groups because of differences in eligibility for the various provisions. Under the 2026 tax rules, that benefit would be $1,700 per dependent ($2,800 per family), on average, and there would be less variation in the average benefit than there is under the 2019 rules.
CBO also analyzes how three policy options that would simplify dependent-related tax provisions—raising the age limit for the child tax credit, establishing a dependent credit, and eliminating the head-of-household filing status—would affect the tax benefit of having dependents.
