As you prepare to file your taxes and consider all the recent changes associated with the new healthcare law, make sure you do your own research and check with their tax preparers to make sure they are up to speed.
In the meantime, we thought we’d re-share a past post highlighting some of the tax credits people with children can take advantage of as you prepare to file your 2014 taxes.
1. Child/dependent care credit – This one depends on your income. But if you have one child, you can get a credit of 20 to 40 percent of up to $3,000 of childcare expenses; that goes up to $6,000 if you have two or more children. The amount of the credit changes along with your family’s adjusted gross income.
2. The child tax credit – This gives you a $1,000 per qualifying child. That means $1,000 right off your tax bill. The catch: Your modified adjusted gross income has to be less than $110,000 for a married couple filing jointly.
3. Earned income tax credit – This is a credit for working families subject to income limitations – ie, if you make a high salary you probably won’t get it. The EITC is a refundable credit, which means that even if it exceeds the taxes you owe, you still get money back. This isn’t only for families with kids, but children make you more likely to qualify.
4. The American opportunity credit – This is an education credit of up to $2,500 (subject of income limits) for folks with dependants in college. It can offset tuition (not books or meals) for a student in a degree program, for up to four years. Up to 40 percent of this credit is refundable – that means you get it even if it exceeds your tax burden.
5. The lifetime learning credit –This one is up to $2,000 per tax return. There’s no limit on the number of years you can take it, and you do not need to be in degree program. You can’t take it along with the American opportunity credit, though, and it’s not refundable.
6. Pay your child a salary – If you have your own business, pay your children and write their salary off as an expense. They get taxed at their tax rate, so it’s a savings for the family. Yes, you can do this. There are a bunch of rules, though – the kid actually has to work, for instance; and no, you can’t send them to the coal mines – so check out some websites before you put Junior on the job.
7. The adoption expense credit –The adoption expense credit. This one is up to $13,360 for the 2011 tax year. It phases out when family income hits $185,000.
8. Student loan deduction – Student loan deduction. You can deduct student loan interest up to $2500 a year if the annual gross income for joint filers is under $150,000.