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Key Money-Saving Tax Tips For Parents

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    Key Money-Saving Tax Tips For Parents

    All taxpayers are interested in finding viable solutions that can successfully resolve money-saving problems during tax season. In fact, raising kids could prove to be a rather costly undertaking, and moms and dads, like other taxpayers, want to save money when filing taxes. Happily, there exist several tax breaks and deductions for parenting expenses that can be used to claim on tax returns.

    The Internal Revenue Service (IRS) states the average taxpayer spends 16 hours to prepare and submit his/her tax return. It may seem rather complicated for taxpayers to deal with a complex tax code of nearly 4 million words that change constantly (579 times in 2010). Most taxpayers ask someone else to help them fill out the forms. Another 30% of taxpayers use tax software to complete the tax forms.

    Here are useful tips that can help you save up tax money without major challenges:

    Adoption Tax Credit

    To qualify for this credit type, you must have paid out for certain expenses concerning child adoption. These include but are not limited to court and attorney fees, related travel expenses, and related meal expenses. To adopt a child with special needs, you can also claim the full adoption credit, regardless of whether it exceeds your actual expenses or not. Anyway, it is nonrefundable, so it cannot be larger than the amount of your actual tax liability.

    Child and Dependent Care Credit

    The Child and Dependent Care Credit requires to have paid someone to take care of your child/ children under the age of 13 while you were busy working or looking for work. To qualify, you must have had childcare expenses for children under age 13 at the end of the year. Additionally, the childcare must have enabled you either to work or to look for work. Moreover, you (if married, together with your spouse) must have received income during the tax year.

    Child Tax Credit

    Tax credits are ideal for reducing a tax bill dollar-for-dollar. Child Tax credit enables parents to get a maximum of $1.000 for each qualifying child who is under age 17 at the end of the year. It is also possible to be eligible for the Additional Child Tax Credit if parents get less than the full amount of the credit.

    To be eligible, apart the above-mentioned age requirement, your child must be your own child, a stepchild, or a foster child. In addition, he/she must be a dependent on your taxes, a US citizen, national or resident alien, and must be living with you over half of the year.

    Earned Income Tax Credit (EIC)

    To be eligible, you must have worked and received income of less than $51.567 the year before. With 3 qualifying children, it is possible to receive up to $6.044. Be aware, the amount of credit is due to the number of children you have and your income earned for the tax year. Income limits are to be applied.

    The great thing about this is that the EIC can minimize your tax bill and even make it possible to get a refund if your tax obligation is brought to zero. According to Ellie Kay, a parents advisor for the Mom Money Clinic and a family financial expert, parents with extremely low income having 1 or 2 kids can also qualify. The maximum EIC amount will be $6.143.

    Education Credits

    Parents can apply for interest payments deductions with regard to certain student loans. This will help reduce the amount of taxable income, and may also minimize tax bills. Income limits are applicable due to filing status.

    Parents can claim credits for higher education either from the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Credit (LLC). To qualify for such tax deduction, you must have paid for your own higher education or your immediate family member's.

    You may apply for a refund of up to $1.000, if the American Opportunity Credit exceeds the tax owed. You can use the AOTC for up to 4 years. As for the LLC, it has no limits as long as your child is involved in an eligible-degree program.

    Here it is also important to mention that qualified expenses refer to school materials, tuition and enrollment fees. Personal living expenses, including transportation, room and board, are out of consideration. Income limits will be applicable, and it is possible to get a refund of a partial AOTC, regardless of whether it features zero tax obligations or not.

    Self-Employed Health Insurance Deduction

    Being self-employed and having paid for health insurance are a must if you need to deduct premiums paid to cover your child under the Affordable Care Act. To qualify, children must be under age 27 at the end of the year, no matter they are your dependents or not. Moreover, you can invest in your employer's Health Spending Accounts (HSAs). Like a Flexible Spending Account (FSA), the latter allows for making $5.000 pre tax contributions annually.

    According to Kay, if your total family healthcare expenses exceed 7.5% of the household's adjusted gross income, you can get a tax deduction. This refers to physical therapy and dental care, and excludes insurance premiums. Elisabeth Leamy, a money expert, notes you cannot qualify for both an FSA and the childcare credit: you should choose one of them.

    Parents who are self-employed are often obliged to pay for both their own health insurance and their families’. If this is your case, you can get a 100-percent deduction of the cost of health insurance premiums paid for children under 27. This implies dental, medical, and long-term care premiums. Importantly, the deductions cannot be larger than the amount you earn. The deduction can be taken if the given couple is not eligible for a plan paid by the employer.

    Dependent Tax Exemption

    Parents can claim their child as a dependent if the latter qualifies, and receive 1 tax exemption for each child. Children must qualify for age, relationship, support, residency, and joint return categories. This refers also to children born in 2013. Leamy notes that if you are single, it is possible to claim 1 exemption. If you are married, you can get 2. Finally, if you have kids, it is possible to apply for 1 per child. This is a deduction and not a credit, so the savings will be due to your tax bracket.

    Your child can be your dependent and be eligible or not for the dependent exemption. Like a deduction, an exemption is called to reduce your taxable income, thus mitigating your tax obligation. Also, it is possible to file a W-4 form with your employer to claim extra withholding allowances.

    As Kay states, you can claim $1.000 for each household child up to 17. If a couple's adjusted gross income makes up $110.000 or more, they cannot qualify for this. Single parents with adjusted gross income of $75000 or more do not qualify either.

    Exemption amounts are periodically changed by the IRS. To qualify, children must be under age 19 at the end of the year. If your children are students, they must be under age 24. There are no age restrictions for permanently disabled children. Even little deductions can be quite beneficial for moms and dads. Get your tax paperwork together and choose the best for your financial wants and needs. No problem if you are doing your taxes yourself. Tax professionals at IRS Debt Help are always ready to provide answers to all your tax-related questions.

    Do you feel you are using all of the tax deductions and credits for which you are eligible? Kindly let me know your thoughts in the comments below.
    Last edited by Sarah Johnson; 06-14-2016, 11:49 PM.

    good read. but I'm not sure about the Self-Employed health insurance deduction