If you are one of the families that get to take advantage of a myriad of tax breaks related to having children, you should really make sure you are taking full advantage of each. There are many families completely unaware of the fact that they get significant tax breaks just for having kids, and those families are missing out on hundreds – if not thousands – of dollars each year not filing their returns correctly. In fact, you could be missing out on a serious chunk of change if you do not familiarize yourself with this credits and tax breaks right now. Since tax time is here – again – it’s time to start looking into ways that you can save on your tax liability so that you aren’t writing a check to the IRS this April. It’s not a fun feeling to have to part with that particular check, but we can make sure that you write one that’s much smaller or even receive a refund this tax season.
Child Tax Credit
If you are a married couple making less than $110,000, head of household making less than $75,000 or a married filing separate filer making less than $55,000, you can get up to $1000 off your tax bill per child. This is called the child tax credit. This amount decreases a bit as your kids get older, and there are a few requirements associated with this credit. For example, your children must live with you at least half the year and they must be provided for by you.
Child and Dependant Care Credit
Did you go to school or work last year while paying for school for your kids? If you did, you might be eligible for this particular credit. This credit allows you to get money taken off your tax liability if you have to pay for childcare up to the age of 13 (this does, obviously, apply to before and after-school care). The catch is that you both have to have jobs or at least one of you has to be employed while the other actively seeks employment or can prove he or she was enrolled in college full-time throughout the year.
American Opportunity Credit
This is one that applies to parents who have kids in college. If your child is attending university at least half-time, you might be able to get some money back to save a bit on your taxes. This only works, however, if your student is living with you and you provide him or her more than half of their support throughout the year. You can take this credit if you are a married couple filing jointly and your income is no more than $160,000 – half that if you are a single filer. The credit is as much as $2500 per year based on enrollment and a few other aspects of your child’s college career.
What’s nice about this particular tax break is the fact that it is for everyone. This is not a tax break just for parents who make this much or don’t make that much; it’s for all parents. This is an exemption. It’s just like your personal exemption, except that it’s for your kids. This means you get a certain dollar amount (currently $4000 per child) every single year knocked off your income so that you are not taxed on it. It drastically lowers your tax liability and makes it possible for you to owe a significantly lower tax bill when it’s time to pay Uncle Sam at the end of the year.
Here’s something many parents do not consider when they go to make their taxes out each year. As a parent, you have a lot of children’s items. And most of us tend to donate these items when we no longer need them. Clothing, toys, shoes, baby necessities such as car seats and cribs and other items; they’re all deductible. If you get a donation receipt from the location to which you donate these items, you can write them off on your taxes and get a nice tax break. You have to have a donation receipt, however, and you have to ensure that you are able to prove that you did donate these items.
Another aspect of parenthood many new parents are unaware of is the fact that you can deduct your medical expenses. For example, if you gave birth to twins, for example, last year and you paid $13,000 after insurance – per child – to the hospital to cover the cost of their NICU stay, you can write that off. That’s because medical deductions are allowed when you are a self-employed working citizen or even just someone looking to itemize their deductions. Along with this is the cost of many premiums, medications and even mileage and parking associated with your doctor visits throughout your pregnancy.
Cut Your Taxes
When you begin working, you fill out something called a W-4. On here, you allot a certain amount of money to be deducted from your check each pay period that goes to the federal government. This is called withholding. This money is set to cover the amount you owe the IRS each year so that you don’t have to pay as much as you thought. But since you have a child now, you are automatically decreasing your tax liability thanks to the exemptions and credits that your child will provide for you on your income taxes. This means you can increase your take home pay each pay period by lowering the amount of money withheld from your checks each pay period. All you have to do is talk to someone in your human relations department or even just your boss to find out how to change this amount and lower your tax liability when it’s time to file those income tax returns. It’s not technically a tax deduction, but your tax is lowered, so it’s a great way to save throughout the rest of the year while also putting a little more of your own hard-earned money into your own pocket.
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