How To Save On Taxes As A Family
- May 31, 2019
- Posted by: asal
- Category: Tax Relief
Everyone is always looking out for tax saving tips when it comes to having to pay back taxes. While there are a variety of tax relief and credit options, many taxpayers aren’t aware of them. If you’re getting ready to welcome a new member of the family, there are new tax relief options for you. All of the money and sleepless nights that go into having children will be worth it. Many tax relief benefits come with having children. Whether it’s your first child or you’re a seasoned parent, children can affect your tax returns this year. Read on for more information from Platinum Tax Defenders on how kids will change your taxes.
Tax Credits from Children
With each new child that you have, you can get a tax credit of up to $2,000. The tax credit lowers your tax bill, so you have less taxable income and have to pay fewer back taxes. Your total income will determine how large of a tax credit you get. Generally speaking, you can claim a child tax credit if:
- You file jointly as a married couple with a combined income of less than $400,000
- If you’re a single parent who makes less than $200,000
Also, up to $1,400 of the tax credit is refundable. That way, you can get a refund check for the difference if it’s higher than the back taxes you owe. However, the refundable portion of the tax credit caps off at 15% of earned income exceeding $4,500.
Tax Credits for Child Care
If you’re a working parent and you put your kid in child care, you will be eligible for another tax credit. The child care tax credit ranges between $600 and $1,050 for children under the age of 13. For two or more children, the child care tax credit ranges between $1,200 and $2,100. Certain factors will determine how much of the credit you get, including:
- Your income
- Cost of child care
Additionally, a child care reimbursement account will permit you to put $5,500 a year away in a tax-advantaged account. That account can be used to pay the bills. These accounts are called Flex Plans and can save you more money on child care than the tax credit. Ask your employer if they have an option to open a Flex account during open enrollment for insurance.
Earned Income Tax Credit
As a parent, your chance of receiving an Earned Income Tax credit increases. While it’s not directly correlated to having a kid, being a parent helps in this case. You might be able to claim an Earned Income Tax credit depending on your income and number of children. If you’re filing jointly and have two children, you can claim the credit if your income isn’t higher than $51,492. The Earned Income Tax credit is an excellent opportunity for low-income families to save on back taxes.
Tax Credit for Adoption
If you adopted your child, you could get a tax credit as well. You can earn up to $13,840 to help offset the cost of adoption. However, you likely cannot claim this tax credit if your adjusted gross income is higher than $240,000.
Tax Breaks for Saving for College
Saving early for your child’s college education is a good idea. A Coverdell Education Savings Account allows you to save $2,000 a year for each child you have. You cannot take a deduction on your taxes, but the money does grow tax-free. Additionally, you can use this money to save for elementary school, high school, or college.
Personal Exemptions for Children
As a note, you cannot claim a personal exemption as a parent anymore. The April 2018 tax season was the last chance to get the previously offered $4,050 deduction.
What are the differences between tax credits and deductions?
Most of the above are tax credits, not tax deductions. Tax credits are more valuable than tax deductions. Why? While a tax deduction reduces your taxable income, a credit gives you a dollar-for-dollar reduction of the taxes you owe. A deduction can only lower your taxable income. You cannot get money back from a deduction.
Tax Relief for Parents of Children with Needs
For parents of kids with special needs, there are additional tax relief options available. Below are four tax breaks that can cut your back tax bills.
Medical Expense Deduction
You can deduct unreimbursed medical expenses. However, you can only deduct the amount that exceeds 7.5% of your adjusted gross income. For example, if your adjusted gross income is $4,000, the threshold is $3,000. If you have $10,000 in medical bills, you can deduct $7,000.
Parents of Special Needs Kids Can Open a 529A Account
The state administers a 529 college savings plan for people who became disabled before age 26. The contribution limit is $14,000 per year, per account.
Child and dependent care tax credit
Parents of children with special needs can also get a tax credit for paying someone to care for their child. Payments to a spouse or another child don’t count. The credit is usually 20% to 35% of up to $3,000 of daycare and similar costs. Also, there is no age requirement for the child to be disabled. This tax credit will reduce your overall taxable income.
Tax Relief as a parent – take advantage!
Parents should consider taking full advantage of these tax credits and tax breaks. However, to be sure you’re utilizing the tax credits to their full advantage, seek a tax relief professional. A tax professional can advise you on exactly how to file your taxes to get the most out of them. Having to pay back taxes as a parent can be even more stressful. Get the help you need, so filing taxes as a parent isn’t so stressful. Also, if you’re wondering how these tax breaks work as a single parent, a tax attorney can help.
Need tax advice as a new parent or single parent? Platinum Tax Defenders can help!
Having kids brings all kinds of new changes in your life. Moreover, of those changes, your tax status is one of them. Speaking with a tax professional can get you the help you need when filing taxes as a new parent. If you owe back taxes as a parent, a tax attorney can help you determine which repayment method is right for you. The tax resolution specialist can also negotiate with the IRS on your behalf and submit the necessary paperwork. Don’t get yourself into back tax debt as a parent. Owing back tax debt can leave you in bad financial shape. When you hire a tax resolution professional, there are other methods you can use to avoid expensive back tax debt. Call Platinum Tax Defenders for a free consultation today.