Anyone with children knows just how much money goes into raising them and making sure they’re happy and healthy with everything they need. The government also recognizes these large expenses and offers a bevy of tax breaks in the form of deductions and credits to help offset the huge expenditures parents shell out each year for their children.
American Opportunity Credit
If you have a child in college, you may qualify to save with the American Opportunity Credit. Formerly known as the Hope college credit, this is a tax credit for certain educational expenses for a student during the first four years of their college career. The qualifications go as follows: your child must be pursuing a degree or credential and enrolled in at least half time for one academic beginning for the specified tax year, they cannot have finished their first four years at the beginning of the specified tax year, and they cannot have a felony drug conviction. The maximum annual credit is $2,500 for each student. In even better news, if said credit brings the amount of tax owed to a zero balance, the IRS will give you 40 percent of the remaining credit funds. To qualify for the full credit of $2,500, you must have a gross income of less than $160,000 if filing jointly with your spouse, and $80,000 or less if filing singly.
When it Comes to Adoption
If you have recently adopted a child, there are a few tax regulations you should be aware of. Adopting is not an inexpensive process, and the IRS understands that the fees associated with adoption can cause a great deal of strain on a financial situation. For any adoptions finalized in 2015, there is a federal adoption tax credit of up to a maximum of $13,400 per child. Keep in mind that this credit isn’t refundable, meaning taxpayers can have the credit refunded if and only if they have federal income tax liability. The amount of credit received depends on income; if the family makes less than $201,010 in modified adjusted gross income, they are eligible for a full credit. The child who has been adopted cannot be a stepchild, and they must be under 18 or incapable of taking care of him or herself in order to be eligible for the credit.
Earned Income Tax Credit
The Earned Income Tax Credit or EITC is a lifesaver for lower income families. Your qualification for this credit depends on various factors, including marital status, your income, and the number of children you have. If the credit amount you receive is more than what you owe in taxes, your credit can be put towards refunding what you paid in Social Security and Medicare taxes that would have been withheld in your paycheck throughout the previous tax year.
Lifetime Learning Credit
If your child is beyond their first four years of college, there is still hope for a tax credit. The Lifetime Learning Credit is designed to provide a tax break to parents or students paying tuition for graduate courses or continuing education. It’s harder to qualify for and provides less money, but something is always better than nothing, especially when it comes to your taxes. This credit comes at a maximum of $2,000 for qualified expenses, and there’s no limit on how many years you can claim this credit. You qualify for the full credit if you’re filing singly and make less than $65,000 a year, or you’re filing jointly and make less than $130,000 together. The great thing about this credit is that the student in question need not be pursuing a degree or credential; most educational and schooling programs qualify.
If you’re having trouble navigating all of the various tax deductions and credits offered, you may want to seriously consider hiring professional help, especially if you’ve just entered the world of parenthood with your first child. Use a site like www.communitytax.com to determine which of these tax credits might apply to you and your little ones and see what the government tax breaks regarding dependents can help you out with financially this year.
Article Submitted By Community Writer