Without a doubt, we all know that being a parent is a big responsibility. If you are a parent, you are constantly worried not only about your children but also making sure you have the income to support them. Well, we have good news, once a year, it pays financially to be a parent, and that is tax time but this blog will surely give you some key tips on how to gain tax deductions.
Lisa Greene-Lewis, a certified public accountant (CPA), and tax expert for TurboTax and U.S. News contributor said “There is a multitude of tax breaks for parents. You spend a lot of kids, but there are definitely some good deductions out there.”
For Children who are younger than 19, children who are permanently or completely disabled, or children up to 24 years old, if he or she is a full-time student, can be claimed as a dependent. This can also include your grandchildren or other relatives you support. If your child files his or her own tax return, no personal exemption will be given if you claim her as a dependent.
Barbara Weltman, a contributing editor for “J.K. Lasser’s Your Income Tax 2017” said: “There’s a slew of tax breaks for parents.”
Following are seven tax breaks which parents can take advantage of when filing their returns.
- Earned Income Tax Credit
Greene-Lewis says “It’s a credit for working parents, for low- and moderate-income taxpayers, and for those without children.” The income limit of a couple without kids can’t be more than $14,880 ($20,430 if filing returns jointly). The income limits for parents with one child are $39,296 and $44,846. With two children, the limits are $44,648 and $50,198. With more than three, the limits are $47,955 and $53,505.
The credit is $510 with no children, with one it is $3,400, $5,616 with two, and with three or more children the credit is $6,318. This is a refundable tax credit means a taxpayer could get a refund without paying any tax thus a big tax deduction.
- Child Tax Credit
This credit can reduce your tax bill up to $1,000 per child who is under 17 if you are a single parent and your income is under $75,000 or $110,000 for a couple. If you earn a high income, the credit is reduced by $50 for each $1,000 above those amounts. Getting tax deductions is not impossible.
To claim the American opportunity credit of $2,500, these requirements must be met:
- Your income must not be more than $80,000
- Your income must be $160,000 if filing return jointly with your partner
- You pay the education expenses for an eligible student.
- You pay qualified education expenses of higher education.
- Eligible student may be you, spouse or your dependent
“Forty percent of the credit is refundable, even if it’s more than what you owe,” Weltman says.
- Lifetime Learning Credit
This credit is for education and qualified tuition expenses, but you can’t claim the Lifetime Learning Credit and American Opportunity Credit for the same student. This credit is for the first $10,000 of eligible tuition expenses and fees and you can claim a maximum of 20% or a credit of $2,000.
- Child and Dependent Care Credit
This type of credit is for working people, so parents claiming Child and Dependent Care Credit must have earned income or work in a school.
This credit provides a tax credit of 20% to 35% or $3,000 in expenses for one child (depending on income) or $6,000 for more than one child who is 12 years old or younger.
- Single head of household status
If you are single with a dependent, you are eligible to file as head of household. This allows you larger standard tax deductions ($9,600 versus $6,300) and more favorable tax brackets.
- Employ your kids
If you’re running your own business, you can hire your child to do tasks such as filing papers, providing computer support, proofreading documents or another age-appropriate task. The first $6,300 earned by each child is tax-free whereas, additional income will be taxed at the child’s tax rate.
From this article, you should have learned that the seven tax deductions can save you money on your taxes. Do you have any questions for us? We would love to hear from you. If you are interested to know more about qualifying for tax credits, please visit our website www.unitedcounselors.org.