Having kids adds a lot of things to your life. Just a few of them are pride, laughter, stress and a lot of expenses. Someone has to pay for the trips to the zoo and the costumes for the school plays – oh, yea and the three meals a day, clothing and medical care. Congratulations, it’s you.
The government recognizes the costs of being a parent and rewards you a bit at tax time. While most everyone knows to claim their children as dependents on their W2s, fewer know about tax credits available to parents and legal guardians.
If your child lives with you at least half the year, see about the Child Tax Credit. With this credit, you can reduce your taxes by $1000 for each qualifying child, meaning one who is 17 years old or younger; related to you by blood, marriage or adoption; and a U.S. citizen, national or resident alien.
Do you work or are you looking for work? Do you hire someone to watch Junior while you do? Is Junior under 13? The Child Care Credit could let you deduct up to 35% of daycare (or nightcare), to a maximum of $6000 per year.
The Earned Income Credit can be a lifesaver if you work for pay but don’t make very much money. The credit can be nearly $6000 if you have three or more children. If you have fewer children, it’s less, but still a great help. This is a credit in the true sense; it could equal more than you paid in.
Did you adopt a child during the year? Good for you; you’re likely eligible for a credit. You have to file your return by mail, though, so you can send the IRS copies of the adoption papers.
If your kids are older and you’re paying for their college, look into the American Opportunity Tax Credit. It can reduce your tax burden by up to $2500. You get credit if you’re the signer or cosigner on the student loans.
Lastly, if you’re self-employed and your children work for you, you may see some tax benefits from that. This is a complicated credit, though, which begs for help from a tax advisor.
To find out more about tax credits, go to irs.gov. You may want adjust your W2 now if you expect to get a lot more back thanks to this helpful advice. Just like your kids, tax laws change every year, so don’t forget to look for updates before you file your return for 2013.