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Kristin MacLaughlin, VP Consumer Marketing for Content Watch, mother of three and always in search of ways that technology can help simplify and connect families.
July 24, 2012Net Nanny for Android 2.0
Mar 07, 2017
Raising a child is without question the most important and rewarding role in life, but it can also get expensive. Families are estimated to spend between $12,350 - $14,000 a year per child (birth to 17 years old), on average, per the Department of Agriculture.
But there’s good news for parents! You can take advantage of the different tax breaks available – and there are quite a few. Read below for our list of popular tax credits (subtracted from the amount you owe) or tax exemptions (decrease the amount of the income upon which you are taxed) to increase your return.
1. Adoption CreditIf you’ve recently adopted a child or multiple children under the age of 18, check out Form 8839 to receive a credit up to $13,460 per child. Qualified adoption expenses include: court costs, attorney fees, travel expenses and other expenses (including meals) that are directly related to the legal adoption of a child. Like most credits, there are income limits to be eligible.
Note: The adoption credits begin to phase out when modified adjusted gross incomes reach $201,920, and phase out completely above $241,920.
2. Dependent ExemptionMost parents can qualify for a $4,050 per dependent exemption as long as their child is under the age 19 (24 if they are a full-time student), and they live with you at least half of the year if you financially qualify. Exemptions phase out after you reach certain income levels:
Tip:The IRS has an Interactive Tax Assistant tool on their site you can use to help determine who can be claimed as a dependent.
3. Child Tax CreditUnlike the exemption above, tax credits lower your tax bill dollar-for-dollar. Most parents are eligible for a Child Tax Credit for each qualifying child under the age of 17 if:
The maximum credit is $1,000 per child, if your income is less than $75,000 for a single individual filer or $110,000 for a married couple filing jointly. For higher-income earners, you may still be eligible for a partial credit, use of the IRS Interactive Tax Assistant tool to determine if a child qualifies for the Child Tax Credit.
4. Child and Dependent Care CreditYou should consider this credit if you paid someone to take care of your child (13 and under) in order to work or to find a job. The credit is capped at $3,000 for one qualified child or $6,000 for two or more qualified individuals. Like most credits, your actual adjusted gross income will have some limitations on how much of a credit you’ll receive. This credit can also be used toward care for a disabled adult in the family. For more information on this credit use the IRS Interactive Tax Assistant tool to determine if your family qualifies for this credit.
Note: If your employer makes any contributions towards your qualified child expenses, you must subtract them from your own qualifying expenses.
5. American Opportunity Tax CreditThis credit can be used for your child, your spouse or yourself, up to $2,500 per year per student for the first four years of college education – however, room and board expenses don’t qualify. Qualified expenses include:
To be eligible for the full credit, your adjusted gross income must be $160,000 or less if married filing jointly; $80,00 or less if filling single. Parents can get a reduced credit with adjusted gross incomes up to $180,000 married filing jointly or $90,000 filing as a single filer.
6. Home Office DeductionIf you work from home, or as a freelancer, this is a deduction you’ll want to explore – but only if you have a dedicated space in your home where you work. Common deductions often include:
Always be sure to keep records and save receipts, including proof of payment for any tax-related expenditures. IRS has a booklet on guidelines for home office deductions that you will want to check out.
Note:Be careful what you declare as an “office”, working at the kitchen table does not count nor does an office that also converts to a playroom after 5 PM.
7. Employ Your KidsIf you own a small business, you can hire your child for age-appropriate tasks such as: filing, providing computer tech support, or even posting on a company social media account. Children under the age of 18 who work for their parent’s business are not subject to social security or Medicare taxes – if the business is sole proprietorship or a partnership in which each partner is a parent of the child.
The first $6,300 earned by each child is tax-free (known as the standard deduction) and any additional income is taxed at the child’s tax rate (which is usually lower than the parents' rate). You, as the business owner, meanwhile, can declare that amount fully deductible as a business expense.
Tip:The IRS has a guideline that you should read before hiring any family member.
If you are someone who waits for the last minute to file, you have a few extra days this year.
The traditional tax filing day falls on a Saturday this year, which would normally get pushed to the following Monday. However, since Monday, April 17th is Emancipation Day in Washington, D.C., you get until Tuesday, April 18th to file.