Not all children are dependents

Most U.S. taxpayers know that you can claim your children as dependents on a tax return to lower your tax bill. Many taxpayers in the United States can also claim their step-children if they pay to support them. Taxpayers in the United States can often claim many different kinds of relatives as dependents, and in certain situations even non-relatives.

For those outside of the United States, there is an additional factor to consider, the Citizen or Resident Test. What this says is that nobody can be claimed as a dependent on a U.S. tax return unless they are a citizen or a resident of the United States, Canada, or Mexico. To determine who you may claim as a dependent, it may be helpful to see a tax professional that specializes in tax returns for U.S. citizens living abroad.

When a U.S. citizen lives abroad, they must still usually file a tax return with the Internal Revenue Service. The United States taxes its citizens on all of their income, even if it is earned while living abroad. A U.S. citizen may move to a country like Costa Rica and marry a local with children from a previous relationship. Unfortunately, the U.S. taxpayer cannot claim his new step children as dependents. The taxpayer will usually be able to claim the dependent if they adopt the child, however that is not a decision to be taken lightly.

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