Know All Your Child Tax Credits
What a pleasant surprise, your children can help to reduce your tax bill for the year. If you are a new parent, here are some tax benefits that you should be aware when it is time to file your federal tax return:
Dependents. In the majority of instances, you are allowed to claim your child as a dependent. You may deduct up to $4,000 per dependent. You are required to lower this amount if your income exceeds certain limits.
Child Tax Credit. You are permitted to claim the Child Tax Credit for each qualified child under age 17. The limit for this credit is $1,000 per child. If you receive less than the full amount of the credit, you might be eligible to claim the Additional Child Tax Credit.
Child and Dependent Care Credit. If you pay for the care of one or more qualifying individuals, you may have the option to claim this credit. Dependent children that are less than 13 years of age are among the qualified individuals. You are required to have paid for care with the intention of having free time to work or search for employment.
- Earned Income Tax Credit. You may be eligible to claim the Earned Income Tax Credit if you worked but earned less than $53,267 in the previous year. You can claim up to $6,424 in Earned Income Tax Credit. Having children isn't a requirement for this credit. You should use the 2015 Earned Income Tax Credit Assistant tool at IRS.gov to learn more about your eligibility.
- Adoption Credit. You might be permitted to claim a tax credit for certain costs related to a child adoption.
- Education Tax Credits. A credit for educational costs may assist you with the cost of higher education. There are two credits that are available. The Lifetime Learning Credit and the American Opportunity Tax Credit can reduce the tax amount that you owe.
If the credit lowers the amount of tax that you owe so that it is less than zero, you may still be eligible for a refund. Even if you don't owe any taxes, you may possibly still qualify. You have to complete Form 8863, Education Credits, and file a return to claim these credits. Use the Interactive Tax Assistant tool on IRS.gov to learn more about claiming these credits.
- Student Loan Interest. You may also be able to deduct the interest that you paid on a qualified student loan. You can claim this benefit even if you don't itemize your deductions.
- Self-employed Health Insurance Deduction. If you paid for health insurance as a self-employed person, you may have the option to deduct the premiums that you paid throughout the year. This can include costs paid to provide coverage for children less than 27 years of age, even if the child isn't your dependent.
These are just some of the options that are available to parents. Call us at 727-345-7790 to explore all your tax credit options.