Tax Savings With Children

From the Desk of Michael T. McCormick

 

TAX SAVINGS WITH CHILDREN

Today’s Friday Tax Tip is a tax saver for anyone with kids. Having 5 of my own, it’s nice to “put them to work,” so to speak, at tax time by using a number of breaks the code allows for kids! If you’re a parent, here are several tax benefits you should look for when you file your federal tax return:

• Dependents.  In most cases, you can claim your child as a dependent. You can deduct $4,000 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits.

• Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit.

• Child and Dependent Care Credit.  You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or look for work.

• Earned Income Tax Credit.  You may qualify for EITC if you worked but earned less than $53,267 last year. You can get up to $6,242 in EITC. You may qualify with or without children. Use the 2015 EITC Assistant tool at IRS.gov to find out if you qualify or give our office a call to help.

• Adoption Credit.  You may be able to claim a tax credit for certain costs you paid to adopt a child.

• Education Tax Credits.  An education credit can help you with the cost of higher education.  Two credits are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify.

• Student Loan Interest.  You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions.

• Self-employed Health Insurance Deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent.

There are some real great opportunities to save tax by knowing the tax code and taking advantage of every break you are allowed. So next time one of the kids asks for $20 to go to the movies, smile and realize they are saving you money at tax time!

 

-Michael T. McCormick