For practical, cultural, and personal reasons, more families are living in multi-generational homes. According to an analysis of 2018 Census data, over 60 million Americans share a roof with their families.
While having the whole family under one roof can sometimes be crazy, the benefits usually outweigh the chaos. If you’re filing your taxes this year, you may discover that there are some significant family-related tax benefits you can take advantage of. Make sure you get the tax deductions and credits you’re eligible for when you sit down to file your taxes.
Making a House a Home
Do you own a house or did you buy a home last year? If so, check to see if you’re eligible for some tax deductions.
- Points: If you have paid points (sometimes called origination fees) to get a specific rate from your lender, you can deduct them from your taxes. If you paid points when you purchased your home, you can deduct your points in the year you paid them. If you refinanced your home, you have to deduct the points over the life of the loan.
- Interest: If you purchased a home and have a home loan you most likely paid mortgage interest. You can deduct the mortgage interest paid during the tax year reported on Form 1098.
- Property Taxes: Property taxes can be really expensive, but if you paid them, you can deduct them on your taxes. For the tax year 2020, your property taxes and state income tax withholding or sales and local income tax cannot be more than $10,000 ($5,000 if you’re married, but filing separately) in total, under tax reform.
Cherish Your Children and Family
There are several tax benefits that you can use as a parent when filing your tax return.
- If your child (under 13) was in daycare last year, you may use Child and Dependent Care Credit to claim up to 35% of $3,000 ($1,050) in childcare-related expenses for one child and up to 35% of $6,000 ($2,100) in childcare-related expenses for two or more dependent children.
- The Earned Income Tax Credit can be a huge credit for working parents. A family with three kids may be able to claim a credit up to $6,660. The Earned Income Tax Credit is the country’s largest program for working people. More than 25 million eligible tax filers received federal Earned Income Tax Credit last tax season and the average Earned Income Tax Credit was $2,476 per filer.
- Although the dependent exemption was eliminated under tax reform, you can claim up to $2,000 per dependent child under 17 with the Child Tax Credit. If your kids are 17 or over, you may be able to claim the new credit for non-child dependents of $500.
- If your kids are in college and are dependents, look into the American Opportunity Tax Credit (AOTC). This is a refundable tax credit up to $2,500 per student for the first four years of college.
- If they don’t qualify for the AOTC, then check out Lifetime Learning Credit. This tax credit is up to $2,000 per tax return and can be claimed even if your dependent only takes one class in college.
You should also set aside a few minutes to check with your Human Resources department to make sure you’ve filled out your w-4 correctly and are having the proper amount withheld from your paycheck especially if you had any changes in income, have more dependents, or purchased a home. You can use TurboTax W-4 withholding calculator to help you easily figure out how much you should be withholding.
Looking Out for Grandparents
Did you provide financial support for your parents or grandparents? If so, then you may be able to claim them as dependents on your taxes. In general, to be considered a qualified relative:
- You must have provided more than half their support
- Their taxable income for 2020 must be less than $4,300
The dependent exemption was eliminated under tax reform, but if your parents or grandparents can be claimed as a dependent, then you may still be able to claim the new Other Dependent Credit of $500 for non-child dependents.
Thoughts on Family and Finances
No matter your family arrangement, make sure you’re getting the most financially by claiming the tax deductions and credits you deserve. The money you save can be used to take care of your loved ones!
And don’t worry about knowing all of these tax deductions and credits. TurboTax will ask you simple questions and give you the tax deductions and credits you deserve based on your answers. If you have questions, you can connect live via a one-way video to a TurboTax Live tax expert with an average 12 years experience to get your tax questions answered. TurboTax Live tax experts are available year-round, in English and Spanish and can even review, sign, and file your tax return. You can have a TurboTax Live tax expert guide you along the way or fully do your taxes from start to finish from the comfort of your home.