Being a parent can have its benefits. This is especially so during tax time. No, your kids will probably not help you sort through your tax receipts, but you can certainly claim some child-related tax benefits when you file your federal tax returns.
Some of these benefits include:
- Claiming the Child as a Dependent: Parents can deduct $4,050 (2016/2017) for each qualified dependent. However, if your income is over a specific limit, the amount that you can deduct will decrease.
- Child Tax Credit: For each qualifying child below the age of 17 years, you can claim the Child Tax Credit. The maximum credit you can claim is $1,000 per child. Individuals in lower income tax brackets might qualify for the Additional Child Tax Credit (ACTC).
- Child and Dependent Care Credit: To claim this credit, you must have paid for the care of one of more qualifying people. Paying for care must have enabled you to work or to look for work. The list of qualifying people also includes dependent children below 13 years of age.
- Adoption Credit: If you paid certain expenses for adopting a child, you could claim a tax credit for the amount paid. Form 8839, Qualified Adoption Expenses provides more details on this.
- Education Tax Credits: The tax authorities provide education tax credits to reduce your tax liability. These credits are comprised of the American Opportunity Tax Credit and the Lifetime Learning Credit. Even parents who owe no tax can qualify for claiming these credits. In some cases, these credits are phased out (high income earners) or have reduced the amount of tax owed to less than zero. The latter situation invariably results in a refund.
- Student Loan Interest: Parents might be able to deduct the interest paid on a qualified student loan. They can claim this even if they do not itemize the deductions. Use this Interactive Tax Assistant for determining if the interest you paid on a student or educational loan is deductible.
- Self-Employed Health Insurance Deduction: The authorities permit taxpayers to deduct the premiums paid during the year. Self-employed taxpayers who paid for health insurance can avail this deduction.
- Earned Income Tax Credit (EITC): You could get a credit of as much as $6,269 in EITC (2016) if you worked but earned less than $53,505 last year. In addition, you could qualify with or without kids. Refer to the EITC Assistant tool for more information.
If you have any further questions, feel free to contact me at paul@launchconsultinginc.com