Source: Sage Speech
Raising a child is damn expensive these days. But, having a child is a blessing, especially during the tax season. It’s because you’re eligible to get tax credits and deductions for your parenting expenses. Uncle Sam knows the plight behind raising a child. That’s why it has kept a number of tax benefit options open for parents to make the most of their money during the tax time. Check out the options below!
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Since your child is dependent on you, you’re eligible for a dependent exemption. A tax exemption lowers your tax obligation by reducing your taxable income. To qualify, your child has to be under 19 years at the end of the year or under 24 years of age if he/she is a student. However, the age restriction doesn’t apply if your child is permanently disabled.
An extra dependent is likely to cut back your tax bill. If you’ve become a parent recently, consider filing a new W-4 form with your employer to cut off tax withholding allowances from your paycheck.
Child tax credits can trim your tax bill up to $1,000 for each dependent child. To qualify for a child tax credit, your kid must fulfill the below criteria:
He/she has to be under 17 years of age at the end of the year
He/she must be your own, step or foster child
He/she should fulfill the criterion of dependent exemption
He/she must be a US citizen, national or resident alien
He/she should be living with you for the most part of the year
If you are a parent, you can get qualified for earned income credit (EIC). However, the tax credit amount depends on your income for the tax year and the number of children you have. Plus, the EIC may get you a tax refund if your tax obligation is zero.
You can qualify for a child and dependent care tax credit if you meet the following criteria:
You make child care expenses for a child who is under 13 years old at the end of the year
You’re required to work or look for a job to meet the child care expenses
You and your spouse need to have a source of income during the tax year in order to claim the child care tax credit
If you are thinking of adopting a child, go ahead since you’ll get some tax benefits for it. If you adopt a child with special needs, you can claim the entire adoption cost. The adoption tax credits that you can qualify are:
Court and attorney fees
Related meal expenses
Related travel costs
You are eligible to get two tax credits for higher education of your child. These are:
The American Opportunity Tax Credit (AOTC)
The Lifetime Learning Credit (LLC)
Expenses that qualify are:
You can use the AOTC for four years and the LLC as long as you child is continuing an eligible degree program.
What a golden opportunity! Isn’t it? You can get an interest payment deduction on certain student loans. For that, the student loan must be taken from a qualified lending institution and your child must be enrolled in a degree program for a certain period of time.
If you pay for your child’s (who is under 27 years of age) health insurance premiums, you can get a 100% deduction on that cost. You can claim this deduction only if you and your spouse aren’t eligible for an employer-paid plan.
So, before filing taxes, check out how you can lower your tax bill and get a higher refund for your parenting expenses. However, due to any reason, if you’ve incurred tax debt, you can reduce your overall tax bill with the help of tax relief options. But, it is always better to make your tax payments on time.