The individual tax identification number (ITIN) was created in 1996 by the Internal Revenue Service (IRS) for individuals – who are not eligible for a social security number (SSN) – to comply with the tax laws of the United States. Below 6 benefits of holding an ITIN.
1/ Other dependent credit
Parents with a gross income below $200K (filing single) or below $400K (filing jointly) are eligible for a $500 non-refundable credit for a child with an ITIN– or for other qualifying relatives.
To read more on this tax credit: https://www.irs.gov/newsroom/understanding-the-credit-for-other-dependents
2/ Child & Dependent care credit
Working parents who incur qualifying expenses to take care of a qualifying person so they can work or look for a job can claim a tax credit of up to $3000 for one qualifying individual with an ITIN ($6000 for 2 or more). A qualifying person includes a child, a disabled spouse or other disabled person claimed as a dependent. Qualifying expenses include nursery school, pre-school, programs below kindergarten, day camps, household services (cooks, maids, babysitters, cleaners).
To read more on this tax credit: https://www.irs.gov/forms-pubs/about-publication-503
3 / American Opportunity Tax Credit
A student with an ITIN and with income below $90K filing single ($180K married filing jointly) can claim up to $2,500 for the first 4 years of his/her post-secondary education.
To read more on this tax credit: https://www.irs.gov/credits-deductions/individuals/aotc
A student with an ITIN number and with income below $90K filing single ($180K married filing jointly) can claim up to $2,000 for his/her post-secondary education.
To read more on this tax credit – https://www.irs.gov/credits-deductions/individuals/llc
5/ Social benefits credits
An individual who contributes to social security under an ITIN may count his credits toward his Social security number (SSN) once he becomes eligible to obtain an SSN. For example, when a self-employed ITIN holder becomes a permanent resident, he/she can ask for his earnings records under his ITIN to be credited to his earnings records under his SSN.
To review your social security earnings history and request records to be updated: https://www.ssa.gov/myaccount/
6/ Immigration records
For undocumented individuals on US territory, filing taxes and reporting income under an ITIN can serve as proof of good moral character and can be helpful if they are able to adjust their immigration status in the future.
Important Note: For the above benefits to be available, the ITIN of the individual will need to be issued before the tax return due date. To know more about applying for an ITIN: https://kbfinancials.biz/itin-services/
Bear in mind the date of this article as tax laws change over time.
For assistance with your international tax needs, please contact Karine Bauer, EA, JD– HERE.
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Updated May 28th, 2023