Monday, March 11, 2013

Being a Parent Has Tax Benefits

Children grab your heart from the moment they are born.  This truth helps you ride out the emotional ups and downs as well as the economic turmoil they may cause in your life.  One side benefit of children is the effect they can have on your tax return.  The IRS has created several benefits in the tax code that are helpful for parents.  Some of the possible benefits or credits that are available include:

·         Dependent Exemption – This reduction immediately reduces your taxable income.  This may be available even if your child was born during 2012.

·         Child and Dependent care Credit – This credit may be available if you had to pay someone to care for your 13 years or younger child/children so you could work or search for work. 

·         Child Tax Credit – This credit may be available for each of your children who were younger than 17 years old on Dec 31, 2012.  There is also an “Additional Child Tax Credit” which you may be eligible for if you do not qualify for the full amount of the initial Child Tax Credit.

·         Earned Income Tax Credit – If you earned less than $50,270 in 2012 by working and have qualifying children, you may be eligible to receive up to $5,891 back. 

·         Adoption Tax Credit – Some expenses involved in adoptions may qualify for this credit.  Be sure to check this if you adopted a child in 2012.

·         American Opportunity Credit – You may be eligible for this if you paid costs for higher education in 2012 for yourself or for immediate family.  If this credit is more than what you owe, you could get up to $1,000 as a refund.

·         Lifetime Learning Credit – This is also available for those who paid costs for higher education in 2012 for themselves or for immediate family.

·         Interest on Student Loans – The interest paid on student loans, if they qualify, may be deductible.  You aren’t even required to itemize your deductions to take advantage of this great benefit.

·         Self-employed Health Insurance – If self-employed and paying for health insurance, you may be eligible to deduct the cost of premiums for children who were under the age of 27 on Dec 31, 2012.  This may be available to you even if the child is no longer a dependent, but you must be paying for their healthcare coverage. 

Many of these possible deductions and credits can easily be missed.  Be sure to check with a trusted tax professional to be certain you receive all of the deductions and credits for which you are eligible.  At the same time, you do not want to claim deductions for which you don’t qualify.  It’s a red flag in the system and can easily trigger an unwanted audit.

No comments:

Post a Comment