New Parents: Don't Miss Out on These Tax Savers
If you are gathering your various forms and receipts in preparation for filling out your taxes but being distracted from the task by your children, we have good news for you: those kids that are keeping you from the work you need to do may significantly reduce the amount that you owe the Internal Revenue Service, simply by virtue of their existence and the care that you provide them. The federal government recognizes that raising kids costs a lot of money, so they've created a number of deductions that you may be eligible for depending upon your circumstances.
Here are some of the deductions that you may be able to take:
- Adoption Credit: Families that have adopted a child into their family are eligible to claim a tax credit to offset some of the costs paid during the process of adoption.
- Child and Dependent Care Credit: If you are working or looking for work and need to pay for care for a dependent child under the age of thirteen in order to do it, then you may be able to claim this credit.
- Child Tax Credit: The Child Tax Credit is available for each child under the age of seventeen, and provides a maximum benefit of $1,000 per child. There is also an Additional Child Tax Credit available for those who receive less than that amount.
- Dependents: Most taxpayers are able to claim a $4,000 deduction for each of their dependent children. For those whose income is above a certain threshold, the per dependent amount may be lowered.
- Education Tax Credits: If you are paying the costs of higher education, the IRS offers two different credits. The first is the American Opportunity Tax Credit, and the second is the Lifetime Learning Credit. Each can be claimed by completing and filing Form 8863, Education Credits, and will reduce the amount of tax that you owe on income. In some cases, taking the credit may result in a refund.
- Self-employed Health Insurance Deduction: Self-employed individuals are eligible to deduct the premiums that they pay for their health insurance coverage. In some cases, this deduction can extend to the costs of covering your children who are under the age of 27, regardless of whether you claim them as dependents or not.
- Student Loan Interest: If you owe money on a qualified student loan, you may be able to deduct the interest that you've paid as a deduction, even if you do not itemize.
It is important that you are certain that you are eligible for a tax deduction before you take it in order to avoid penalties and fines.