Raising children is expensive, from when they are newborns needing diapers to when they are teenagers demanding name brand shoes, the cost of raising a child from infancy to 17 years old is around $233,610. When it comes time to file your tax return it’s important to know every tax break available to you so that you can have a little bit of that money back.
Exemptions for Dependents
If you’re filing jointly with your spouse, typically you both will take a personal exemption that will decrease your taxable earnings by exactly $4,050 a person. However when you’re a parent, this means you are able to lower your taxable income by the same sum for each of your children under 19, or 24 if your child is a student. For example, if you have five people in your family you can decrease your total taxes by $20,250 [$4,050 x 5=$20,250.] You are eligible for this exemption if you are married couple making less than $311,300 a year, or if you’re a single filer making less than $259,400 a year.
Earned Income Tax Credit
Commonly referred to as the EITC, the earned income tax credit is a great tax break for low to moderate- income homes. To see if you qualify for this tax credit, you can refer to the IRS’s website to view the various income caps. The amount you can receive from this tax credit will depend on your income and how many children you have. In order to claim your dependents, proof of relationship, shared residency, and age must be presented. For the year 2016 if you’re married filing jointly, make less than $53,505 and have three or more children, you can earn a tax break of $6,269. If you’re a single parent, you can receive this same tax break while making $47,955 or less a year.
Child Tax Credit
This deduction is only for those couples making $110,000 or less a year. If your salary is under $130,000 you may qualify for a reduced child tax credit. If you’re a single filer you can qualify for this credit if you make $75,000 or less. The child tax credit will reduce the amount of taxable income owed to the government by $1,000 for each child under 17 that still lives with you.
Additional Child Tax Credit
If you can claim the entire amount of the Child Tax Credit, then you will not be eligible for the Additional Child Tax Credit. If you have any money left over from the Child Tax Credit, you are possibly qualified to receive a portion or all of the left over amount through the Additional Child Tax Credit. For instance, if you owe $800 in taxes, thanks to the Child Tax Credit of $1000, that sum will be reduced to zero. The Additional Tax Credit then credits you back the difference of $200.
Now that you’re aware of the four tax breaks available for parents, you can be a little more excited about filing your taxes this year.