Tax Tips for Parents

If you’re a parent, then you probably already know that kids can be pretty darn expensive! The good news, however, is that there are ways to cut back on the costs of having kids. One thing you can do to save money, for example, is to take advantage of the many tax credits and deductions that exist for the moms and dads of the world. Below, you’ll find the details on some of the very best ways for parents to save on their taxes!

The Dependent Deduction

As long as your little (or not so little) one qualifies as a “dependent,” you’ll qualify for the dependent exemption. This exemption enables you to reduce your taxable income and thus lower the amount of taxes you owe.

In order for a child to count as a dependent, he or she must be under 19 or under 24 if the child is a student and financially dependent on you. Also, bear in mind that dependents who are permanently disabled are not limited by the age restriction.

Dependent Care Credit

Dependent care or child care can get very expensive. However, for many people, it’s an absolute necessity. Fortunately, though, there is a tax credit that allows you to deduct the money you spend on child care or dependent care from your taxes.

This credit, known as the child and dependent care tax credit, is for people who:

· - Pay for childcare for children under 13

· - Are able to work or look for work as a result of the childcare or dependent care

· -Earned income during the tax year

If you meet these basic qualifications, you can talk with your tax advisor to learn how to make the most of this credit.

Adoption Tax Credit

If you chose adoption as your route to parenthood, then you can recoup some of your costs through the adoption tax credit. Your income will determine your eligibility, however, so research the credit and talk with your accountant before just assuming you qualify. You’ll also need to determine, based on various factors, the exact amount of credit you are able to claim. In general, though, most people can earn tax credit for:

· - Relevant legal fees

· - Relevant meal costs

· -Relevant travel costs

· -Relevant lodging fees

Just make sure you have proof of any expenses you claim. Keep receipts or other proof stored away in case of an audit.

Student Loan Interest Deductions

Higher education is expensive, and if you’re footing all or part of the bill for your child via student loans, you may qualify to deduct interest payments made on some loans. If you do qualify, the deduction can greatly reduce your amount of taxable income.

Loans must be from a legitimate lending institution and must have been taken out while your child was enrolled part-time or full-time in a degree-earning higher education program.

There are other eligibility requirements and caveats to bear in mind as well, so, as is advisable with all of these savings methods, check with your accountant to ensure you qualify and to make sure you file correctly!

Wednesday, March 2, 2016