Child-rearing can be expensive but, as parents, you can avail of these tax breaks to lessen your monetary obligations while still ensuring that their needs are sufficiently met. You should discuss these tax breaks with a reliable Taxact consultant so as to make the right claims on the right form at the right time, a must in the bureaucratic processes of the Internal Revenue Service.
Get Credit for Each Qualified Child
When your family expands to include a new-born baby, you can avail of a $1,000 tax credit, which is available to parents in the middle-income and low-income tax brackets. Think of it as a the gift that keeps on giving each and every year until your son or daughter turns 17 years old. You will also get the full credit regardless of when the child was born during the year, whether it’s on January 1 or July 1 or December 31.
Like all tax credits, you will love this $1,000 credit because it decreases the amount of your payable tax dollar for dollar; in a tax deduction, the government only decreases the amount of your income that it has the authority to tax. Thus, the $1,000 credit will actually reduce your tax bill by $1,000 but there’s also a catch – you cannot avail of it when your income exceeds $110,000 (joint returns) or above $75,000 (head of household and single returns).
The good news: You can claim credit on as many kids as you want for as long as they meet the requirements set by the law. You may even consider the credit as refundable, in a manner of speaking, as the IRS will refund the difference between what the credit is worth and your income tax liability.
Get Credit for Child Care Cost
In the course of raising your child, you will also incur child care expenses, which can also be covered in a tax credit program. In effect, you will be enjoying reductions in your child care expenses with the eligible expenses for the tax credit being pre-school expenses, nanny services, summer day camp, and before or after-school care.
The tax credit applies to children under 13 years old. You are eligible for anywhere from 20 percent to 35 percent credit for up to $3,000 for one child or up to $6,000 for two or more children. Keep in mind that the percentage will decrease as your income increases.
Indeed, when you look hard enough, you will eventually find tax credits that will make life with children so much more enjoyable.