The Many Ways Children Lower Your Taxes
It may seem as though raising children is more expensive than ever, but did you know that your children can help you lower your taxes in many ways?
A certified public accountant can make sure that you get all of the deductions possible for your children. Here are the most common tax benefits you can take for your children:
- Dependency Exemption:
The exemption for dependents in 2016 is $4,050. The tax benefit for this is a reduction of your income subject to federal tax. Your tax savings begins the year your child was born, even if his or her birthday is December 31st.
- Child and Dependent Care Credit
This tax credit is available if you have a child under the age of 13 who needs care while you work or look for work. This credit includes the cost of summer camp, nursery school, day care, private kindergarten, and after school care programs when the tax requirements are met. Keep a record of all child care expenses to claim this credit.
- Child Tax Credit
This additional $1,000 Child Tax Credit is available for children under 17 and reduces your taxes dollar for dollar. The credit phases out for single parents earning over $75,000 or married couples earning over $110,000. Individuals who do not qualify for the full amount of the Child Tax Credit may be eligible for the Additional Child Tax Credit.
- Earned Income Tax Credit
The Earned Income Tax Credit is available to individuals whose wages and self-employment income falls below a specific level and depends on how many children you have.
- Coverdell Education Savings Account
The contributions to a Coverdell Education Savings Account are not tax deductible, but the qualified distributions to pay for expenses at an eligible educational institution are tax-free.
- American Opportunity Credit
The American Opportunity Credit can be claimed by the parent of a college student for up to $2,500 during the first four years of college.
- Lifetime Learning Credit
The Lifetime Learning Credit helps offset the cost of higher education for graduate level and continuing education courses.
- Adoption Credit
Tax credits are available for the qualifying expenses involved in the process of adopting a child.
Other deductions may also be available. Randee Abramson CPA will help you find all tax credits you can take for your children and dependents to lower your overall tax bill. Call today for a free consultation.