Eight Tax Benefits for Parents

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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.

8 responses to “Eight Tax Benefits for Parents”

  1. Can my husband and I claim our 21 year son who lives with us. We are supporting him. Also, would be we be able to claim his student loan interest since we are paying his loan because he is unable to pay for it at this time. Also, my husband and I are co-signer on his loans and paying it back.

    • Unless your son is a full time college student or permanently and totally disabled, the answer is NO.
      The loan interest might be deductible since your name is on the loan.
      Generally, you can claim the deduction if all of the following requirements are met.

      1. Your filing status is any filing status except married filing separately.

      2. No one else is claiming an exemption for you on his or her tax return.

      3. You are legally obligated to pay interest on a qualified student loan.

      4. You paid interest on a qualified student loan.

      The amount of your student loan interest deduction is phased out (gradually reduced) if your MAGI is between $60,000 and $75,000 ($120,000 and $150,000 if you file a joint return). You cannot take a student loan interest deduction if your MAGI is $75,000 or more ($150,000 or more if you file a joint return).

      Your son may wish is ask for a hardship deferment from is loan carriers.

  2. Can I claim out of pocket medical expenses for my son’s father who is disabled, NOT receiving any disability benefits, not able to work/stays at home to take care of our son so I can work? We are domestic partners but NOT married…As well as supporting him & my son, I pay out of pocket for his Doctor Appointments & high dollar Pharmacy Bills…they amount to as much as our rent ( like paying 2 rent payments & I am a slave to paying for this & everything else that needs to be paid for us to live….it’s a lot of financial burden, stress & responsibility on me & doesn’t leave anything else…our quality of life is as good as we can make it, but it’s pretty non-existent. Is there anything I can do regarding taxes/tax filing that would make a positive difference? Please advise! Thank you!

  3. Can I claim a 18 year old who’s parents put her
    out in May of 2012 (pregant) I took her to her graduation from High School her parents didn’t even show up. Well this child & her child that came in Sept of 2012 stayed with me without
    any support from her parents until March of 2013
    when she gave the baby to his father.

  4. Good article. Just to clarify, the student loan interest deduction starts phasing out at $60K AGI for singles and $125K AGI for married, filing joint. Singles are phased out at $75K AGI and married, filing joint at $155K AGI. Based on 2012 law.

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