Monday, October 10, 2016

Eight Ways Children Lower your Taxes

  1. Got kids? They may have an impact on your tax situation. If you have children, here are eight tax credits and deductions that can help lower your tax burden.
  2. Dependents: In most cases, a child can be claimed as a dependent in the year they were born. Be sure to let the office know if your family size has increased this year. You may be able to claim the child as a dependent this year.
  3. Child Tax Credit: You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax.
  4. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child under age 13 while you work or look for work. Be sure to keep track of your child care expenses so we can claim this credit accurately.
  5. Earned Income Tax Credit: The EITC is a benefit for certain people who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.
  6. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt a child.
  7. Coverdell Education Savings Account: This savings account is used to pay qualified expenses at an eligible educational institution. Contributions are not deductible; however, qualified distributions generally are tax-free.
  8. Higher Education Credits: Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar for dollar, unlike a deduction, which reduces your taxable income.
  9. Student Loan Interest: You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.
As you can see, having children can make a big impact on your tax profile. Make sure that you're getting the appropriate credits and deductions by speaking to a tax professional today.