It’s summer, and the kids are underfoot. But when you are feeling exasperated, just remember what valuable tax benefits they will qualify you for next year when you file your tax return.
Here are eight of them:
1. Child and Dependent Care Credit – If you have children under the age of 13, you may be able to claim a tax credit if you pay someone to care for them while you are at work or looking for work. Depending on your income, that could save you up to 35% of your expenses up to $3,000 for one child or $6,000 for two or more. Here’s some more good news: Summer day camps may qualify.
2. Child Tax Credit - You may also be eligible for a child tax credit, which is even better than a deduction, since it reduces your taxes dollar for dollar. The Child Tax Credit is an additional $1,000 credit you may be able to claim for children under 17. For married couples with income over $110,000 or $75,000 for a single parent, the credit phases out.
3. Earned Income Tax Credit – How much of the Earned Income Tax Credit you can earn and qualify for depends on how many dependent children you have. For 2013, if you have three or more children, you can earn up to $46,227 and qualify. With just two children, that drops to $43,038. Only one child, your earnings and adjusted gross income can’t top $37,870. No children? No problem, as long as your income is less than $14,340.
4. Dependency Exemption – In 2013, you can claim a personal exemption deduction of $3,900 for each child and other dependent. Those exemptions reduce the portion of your income that is subject to federal tax. The higher your tax bracket, the more each dependency exemption saves you. For example, if you are in the 15% bracket this will save you $585, and at 25% you’ll save $975 in taxes.
5. Adoption Credit – For 2013, you can claim an adoption credit for up to $12,970 per child you adopt. The credit will begin to phase out for families with incomes above $194,580 and the credit will go away completely for those with incomes around $234,580.
6. Medical Expenses – If your medical expenses are more than 10% of your adjusted gross income don’t forget you can deduct you child’s medical expenses.
7. Education Credits – If you pay for college expenses for your child, you may claim the American Opportunity Credit or the Lifetime Learning Credit for those expenses. Both of those credits reduce the taxes you owe, as long as your income is under certain amounts. If you invest in a 529 plan, the earnings on those funds aren’t taxable if they are used to cover some of their college expenses.
8. Student Loan Interest – Up to $2500 of the interest you pay on student loans is tax deductible, even if you don’t itemize deductions, as long as your income is under $75,000.
Children are expensive, that’s for sure, but these tax breaks can take some of the sting out of the costs of child-rearing.