Belize Tax Deductions: Claiming For Dependents

In Belize, there is an Employee Income Tax that must be filed by all persons receiving an income. The rate for this tax is 25% of the chargeable income. While there are personal relief deductions available, there is no mention of deductions for dependents. In the United States, however, deductions and tax credits are available for those with dependents. These deductions and credits include the Child Tax Credit, the Child and Dependent Care Credit, and the Earned Income Tax Credit.

Who qualifies as a dependent in Belize?

In Belize, a dependent is generally considered to be someone who relies on another individual for financial support. The specific criteria for who qualifies as a dependent can vary depending on the context and the specific programme or benefit being discussed. Here is an overview of who may be considered a dependent in different situations in Belize:

• Immigration and Visas: When applying for a visa or residency in Belize, dependents typically include a spouse, a child or stepchild under the age of eighteen, and any other person certified as a dependent by a court order. For the Qualified Retirement Program (QRP), dependents are specifically defined as the spouse and children under eighteen years old.
• Taxation: For tax purposes, a dependent is usually defined as an individual who is financially supported by the taxpayer and meets certain relationship criteria. This can include children, parents, siblings, or other relatives, depending on the specific tax laws and regulations in Belize.
• Social Services: In the context of social services and government assistance programmes, a dependent is often considered to be someone who relies on the support of another individual due to age, disability, or other factors. This can include children, elderly individuals, or people with special needs.
• Employment Benefits: Some employers in Belize may offer benefits to employees' dependents, such as health insurance or other perks. In this context, dependents typically refer to spouses and children but may also include other family members, depending on the specific company's policies.
• Legal Context: In legal matters, a dependent is often defined as someone who is financially or legally dependent on another individual. This can include minor children, elderly parents, or other relatives who rely on the support of the primary breadwinner.

It is important to note that the definition of a dependent can vary depending on the specific context and the relevant laws, regulations, or policies in place. When determining who qualifies as a dependent, it is always advisable to refer to the specific guidelines provided by the relevant authorities or organisations in Belize.

What are the tax credits and deductions for families?

Families with children may have access to more tax deductions and credits than taxpayers without children. Here are some of the tax credits and deductions that families can take advantage of:

Child Tax Credit (CTC)

The Child Tax Credit is a tax benefit granted to taxpayers for each qualifying dependent child. The maximum amount for the 2024 tax year is $2,000 for each qualifying child under age 17. The credit begins to phase out when the filer's modified adjusted gross income exceeds $200,000 ($400,000 in the case of a joint return). The refundable portion of the credit, also known as the Additional Child Tax Credit, maxes out at $1,700 for 2024.

Earned Income Tax Credit (EITC)

The EITC is a refundable tax credit that helps lower-income taxpayers reduce the amount of tax owed on a dollar-for-dollar basis. The credit is available to taxpayers without children, but those with dependents will receive a higher credit. The credit increases with the addition of each child to the family, up to three children. For the 2024 tax year, the maximum credit amount for filers with three or more children is $7,430.

Child and Dependent Care Credit

The Child and Dependent Care Credit provides relief to parents who pay for the care of a qualifying child or disabled dependent while working or looking for work. In the 2024 tax year, you can include up to $3,000 of eligible expenses for a maximum credit of $1,050 if you have one qualifying dependent. This rises to $6,000 of eligible expenses and a $2,100 credit if you have two or more dependents. The percentage of those expenses allowed as a credit depends on your income and ranges from 20% to 35%.

Student Loan Interest Deduction

The student loan interest deduction allows you to deduct up to $2,500 of the interest paid on a student loan during the tax year. For example, if you fall into the 12% tax bracket and claim the full amount, the deduction would reduce your tax for the year by $300.

American Opportunity Tax Credit (AOTC)

The AOTC helps offset the cost of the first four years of a student's postsecondary education. It allows a maximum annual tax credit of $2,500 per eligible student for qualified education expenses. If the credit brings your tax bill to $0, you can get a refund of up to 40% of the remaining credit (up to $1,000).

Medical and Dental Expenses Deduction

You may be able to deduct certain out-of-pocket medical and dental care expenses for yourself, your spouse, and your dependents. The deduction applies only to expenses that exceed 7.5% of your income.

Head of Household Status

In addition to the above tax credits and deductions, you may qualify for head of household status if you have a dependent. Taxpayers who file as heads of household have a higher standard deduction and a lower marginal tax rate than single filers, which can result in lower taxes.

How does the Tax Cuts and Jobs Act affect families?

The Tax Cuts and Jobs Act (TCJA) made significant changes to the tax code, impacting families in several ways. Here are some key ways the TCJA affects families:

• Income Tax Rates: The TCJA retained the seven individual income tax brackets but lowered the top rates. The 39.6% rate was reduced to 37%, the 33% bracket dropped to 32%, the 28% bracket to 24%, the 25% bracket to 22%, and the 15% bracket to 12%. The lowest bracket remained at 10%, while the 35% rate was unchanged.
• Standard Deduction: The TCJA significantly raised the standard deduction. For the 2024 tax year, the standard deduction for single filers is $14,600, and $29,200 for married couples filing jointly.
• Personal Exemption: The TCJA suspended the personal exemption, which was $4,150, through 2025.
• Child Tax Credit: The law increased the child tax credit to $2,000 and introduced a non-refundable $500 credit for non-child dependents. The child tax credit can only be claimed if the taxpayer provides the child's Social Security number. Qualifying children must be under 17 years of age. These changes will expire in 2025.
• Earned Income Tax Credit (EITC): The EITC is a refundable tax credit that helps lower-income families. The TCJA did not directly change the EITC but did raise the income thresholds for phase-outs, allowing more families to benefit from the credit.
• Student Loans: The TCJA expanded the use of 529 plans to include funding for K-12 private school tuition, up to $10,000 per year, per child. Additionally, the SECURE Act of 2019 allowed plan holders to withdraw up to $10,000 penalty-free to pay down qualified student debt.
• Retirement Savings: The TCJA repealed the ability to recharacterize one type of retirement contribution as another (e.g., designating a Roth contribution as traditional). The SECURE Act of 2019 also allowed individuals to contribute to Individual Retirement Accounts (IRAs) past the age of 70½.
• Alternative Minimum Tax (AMT): The TCJA temporarily raised the exemption amount and phase-out threshold for the AMT, which is intended to curb tax avoidance among high-income earners.
• Mortgage Interest Deduction: The TCJA limited the mortgage interest deduction for married couples filing jointly to $750,000 worth of debt, down from $1,000,000 under the previous law. This change will expire after 2025.
• Miscellaneous Itemized Deductions: The TCJA suspended miscellaneous itemized deductions, including deductions for moving expenses (except for active-duty military personnel) and union dues, through 2025.

Overall, the TCJA brought substantial changes to the tax code, impacting families across various aspects of their financial lives. While some provisions are set to expire in 2025, others are permanent changes to the tax landscape.

What are the standard deduction amounts?

In Belize, the standard deduction amount is $50 for all taxpayers after the application of the rate. This is in addition to the possibility of applying other deductions when calculating the tax base.

For those earning less than $13,000 per year, they are exempt from paying income tax. For those earning between $26,000.01 and $27,000, the personal relief amount is $24,600. If you're earning between $27,000.01 and $29,000, the personal relief is $22,600. And for those earning $29,000.01 and over, the personal relief is $19,600.

The general income tax rate in Belize is 25%. The deadline for taxpayers to file their income tax return is March 31.

What is the Child Tax Credit?

The Child Tax Credit is a tax benefit granted to taxpayers for each qualifying dependent child. The maximum amount for the 2024 tax year is $2,000 for each qualifying child. The credit begins to phase out when the filer's modified adjusted gross income exceeds $200,000 ($400,000 in the case of a joint return). The refundable portion of the credit, also known as the Additional Child Tax Credit, maxes out at $1,700 for 2024.

The Child Tax Credit can reduce your taxes by up to $2,000 per qualifying child age 16 or younger. If you do not owe any taxes, up to $1,600 of the Child Tax Credit may be refundable through the Additional Child Tax Credit.

Children over the age of 16 are not eligible for the Child Tax Credit. However, these older children and other qualifying dependents may be eligible for a new tax credit of up to $500 called the Credit for Other Dependents. Dependents must be a U.S. citizen, U.S. national or U.S. resident alien. They must also be a qualifying child or qualifying relative.

A qualifying child must meet the relationship, age, residency, support and joint return tests. A qualifying relative must meet the "not a qualifying child, member of household or relationship" test, gross income test and support tests.

Both credits start phasing out, or being reduced, if your adjusted gross income exceeds $400,000 for married filing jointly filers or $200,000 for other filing statuses.

Frequently asked questions