When it comes to children and taxes there are a few very important things you absolutely must know.
While your children are usually busy costing you money, tax-time is the one point in time that they can actually save you money.
There are 2 major categories where kids can save you on your taxes.
First, you could be eligible to report your child as a dependent. Second, if you are able to claim son or daughter as your dependent, then you may be entitled to some lucrative tax credits.
To begin, let's break your children into dependents and exemptions. I see the eyes beginning to glaze over, but track with me here.
If you are the primary caregiver of your child (i.e. they live with you 1/2 the year and you provide over 1/2 of their expenses), then you are most likely able to claim your son or daughter as a dependent.
For each dependent you claim on your taxes, you are entitled to a $3,650 tax deduction, which directly reduces your taxable income.
Beyond children providing deductions, they also provide tax savings through credits such as the dependent child tax credit and child daycare credit.
The dependent child tax credit is pure gold, saving you a cool grand taken straight off your final tax bill.
The essential thing to note with this credit is that it is a credit and not a deduction which reduces your final taxes owed by 100% of the credit.
Yet another credit to consider along with the tax credit described in the last paragraph is the child care credit.
Under the rules specified by this lucrative tax credit, you could be eligible to receive up to 3K to 6K for your children's expenses charged by their caretaker. A few stipulations apply such as you having to be at work or looking for work. But hey, it's a pretty good deal overall.
Well, that's about it. I sincerely hope that you have a little new insight on how your kids could bring you very big breaks in the amount of taxes you end up owing this year.
While your children are usually busy costing you money, tax-time is the one point in time that they can actually save you money.
There are 2 major categories where kids can save you on your taxes.
First, you could be eligible to report your child as a dependent. Second, if you are able to claim son or daughter as your dependent, then you may be entitled to some lucrative tax credits.
To begin, let's break your children into dependents and exemptions. I see the eyes beginning to glaze over, but track with me here.
If you are the primary caregiver of your child (i.e. they live with you 1/2 the year and you provide over 1/2 of their expenses), then you are most likely able to claim your son or daughter as a dependent.
For each dependent you claim on your taxes, you are entitled to a $3,650 tax deduction, which directly reduces your taxable income.
Beyond children providing deductions, they also provide tax savings through credits such as the dependent child tax credit and child daycare credit.
The dependent child tax credit is pure gold, saving you a cool grand taken straight off your final tax bill.
The essential thing to note with this credit is that it is a credit and not a deduction which reduces your final taxes owed by 100% of the credit.
Yet another credit to consider along with the tax credit described in the last paragraph is the child care credit.
Under the rules specified by this lucrative tax credit, you could be eligible to receive up to 3K to 6K for your children's expenses charged by their caretaker. A few stipulations apply such as you having to be at work or looking for work. But hey, it's a pretty good deal overall.
Well, that's about it. I sincerely hope that you have a little new insight on how your kids could bring you very big breaks in the amount of taxes you end up owing this year.
About the Author:
If you want to discover many more relevant ways to save big money such as what has been described here, head on over to Tax Credits Online. Tomas Sangold has written about energy credits, home credits, retirement tax credits, and so much more.