Happy National Parents Day! Here Are Tax Benefits For You…
July 23, 2017 : Allie Freeland – Contributing Editor
Happy National Parents Day! As a parent, your kids offer many blessings…. One of them believe it or not is potential tax savings! Here are some of tax benefits for having children and other dependents…
First, Make Sure You Claim Dependents on Your Upcoming Tax Return
Claiming your child as a dependent on your yearly tax return could shelter you up to $4,050 of your income from tax in 2017, saving you a quick $1,000 if you’re in the 25% bracket.. When claiming dependents on taxes, you must sure they are a “qualifying” child or relative.
To be a qualifying child, the following requirements must be met:
- They are your children, stepchildren, foster children, sibling, half sibling, stepbrother, stepsister (or a descendent of any of those)
- They must be under the age of 19 and be younger than you (or your spouse), or be a full-time student under age 24 and younger then you, or be permanently and totally disabled
- The child must have lived with you for more than half the year
- The child must not have provided more than half of his or her support for the year
- The child must not be filing a joint return for the year
- The child normally must be a U.S. citizen or national, resident alien, or a resident of Canada or Mexico
- You are not claimable as a dependent on someone else’s return
To be a qualifying relative, the following requirements must be met:
- The person cannot be anyone’s qualifying child
- The person must be related to you in one of several ways, or live with you all year as member of your household
- The person’s gross income for the 2017 tax year must be below $4,050 and
- You must provide more than half of the support for that person during the year
- The person must be a U.S. citizen or national, resident alien, or a resident of Canada or Mexico
The IRS provides more information here: “Who Can I Claim as a Dependent?”
Tax Credits for Parents
There are a handful of tax credits, dollar-for-dollar reductions of the amount of tax you owe, parents can take advantage of.
Child Tax Credit
The child tax credit allows you to claim a credit of $1,000 for each qualifying child until the child reaches the age of 17. This credit can be both nonrefundable and refundable. The refundable portion of the child tax credit is called the additional child tax credit. The credit is phased out at higher income levels – $110,000 on joint returns, $75,000 or higher on single returns and head of housefold, and $55,000 for married filing separately.
(Find out more about the Child Tax Credit.)
Earned Income Tax Credit
The Earned Income Tax Credit (EIC/EITC) was created to help low-income, working parents. It’s a refundable tax credit, so even if your tax liability is nothing, if you qualify for EITC the tax credit is yours. However, the criteria for claiming the credit can be confusing so connect pay attention to the details.
(View more information on the EIC.)
Around 1.5 million children in the United States are adopted. If you are a parent to an adoptive child, you have another potential tax credit coming your way — the Adoption Credit. This credit helps offset adoption costs — and adoptive parents can claim a tax credit of up to $13,570 in tax (in 2017).
(Get more details on the Adoption Credit.)
Happy National Parents Day! We hope this article serves as a resource for all working parents out there. Remember: you don’t have to worry too much about learning the ins and outs of tax filing statuses and credits. An H&R Block tax professional can help you figure out what you’re eligible for come tax time! Just make sure you give them as much detail and documentation possible.