The Internal Revenue Service (IRS) offers many deductions and credits that benefit parents and taxpayers who claim other dependents.
to benefit from these tax breaks, here are seven tax return tips you need to know.
you must have correct Social Security Numbers (SSN) for all dependents.
In years past, you could get by without a SSN for very young children. However, this is more the case
Now if a dependent has no SSN or other tax number, you can not take a deduction or claim another tax benefit for them -. No exceptions.
In fact, if you try, you may be fined
Double -. check the SSN is correct in your statement and that the name exactly matches what is printed on your child or the burden of social security card.
do not pass on the Earned Income Tax Credit (EITC).
EITC is one of the most generous tax advantages there, but it is also one of the easiest to miss. The income thresholds for this credit are not as high as you may think.
If you have a child and are filing a joint return, you and your spouse can collectively earn up to $ 44,651 in 2015 and still claim credits.
With two children, you may qualify for a credit if you and your spouse together earn up to $ 49,974 and file a joint return. If you have three or more children, the income limit is $ 53,267.
EITC benefits vary greatly depending on the number of dependents you have, so you'll want to make sure that each claim.
A common way people miss out on this benefit is assuming that the parent who claims the dependency exemption may take the EITC for eligible children.
However, the parent who has the child living with him or her is the only one who can claim the child tax credit. It is quite possible that one parent claims the child as a dependent, and the custodial parent claims the child for the EITC.
Get your full credit for child care expenses.
If you pay someone to care for your child while you work or look for work and your income is below $ 15,000, you may qualify for a credit of up to 35 percent of the first $ 3,000 in costs. If you have two or more children, the credit can be as much as 35 percent to $ 6,000 in fees.
The percentage falls to 1 percent for each additional $ 2,000 of income until it reaches 20 percent ($ 43,000 or more).
to take the credit, you need the social security number or other taxpayer identification number of the person or the organization to which you pay the fee.
is a good reason not to pay child care providers "under the table". you must insist that they give you receipts and provide you the information you need to get your tax benefits.
If you can not get this information from the supplier, be prepared to show that you used due diligence in trying to do so.
you qualify for this credit until your child reaches age 13, however, if your child or dependent are not physically or mentally capable of self-care while you work or look for work, you can take this credit regardless of the child's age.
make repayments of the employer for child care if needed.
as valuable as the dependent care credit for children is, repayments from the employer for child care can be even better. If you have access to a reimbursement account at work, you or your employer may be able to contribute up to $ 5,000 per year in this account and use it for childcare.
Because the money you put into this account escapes both social security and income tax, it is particularly useful for taxpayers who have medium and income levels higher.
You may also hear this type of plan is considered a benefit plan dependents.
do not assume that you can not take a dependency exemption.
Each individual you can request a dependent lowers your taxable income by $ 4,000 in 2015. This will save you about $ 1,000 if you're in the tax bracket of 25 percent
Please note these examples of situations in which it is easy to miss a dependency exemption: ..
- a child is born during the year this does not matter when your child is born during the year. If he or she appears before the New Year, take the exemption for the whole year.
- A child or dependent dies during the year. You might be able to claim a dependent for the year your child is dead if your home was considered the child's permanent residence for more than half of the time he or she was alive . You can not claim an exemption for a stillborn child, however.
- You support a child who does not live with you. If your child or dependent does not live with you because he or she was temporarily away at school or hospital, for example, he or she can still qualify for the exemption. A child may also be charged to you, even if he or she lives with the other parent as long as you meet the qualifications to take the dependency exemption.
- Your "child" is not so little anymore. You can always take a dependency exemption for your dependent after 18 years if they go to school full time and are under 24 years According to the IRS, "full time" they met the qualifications of presence full-time school for five months during the year. The months need not be consecutive.
Being a parent can qualify you for a different filing status
Choosing the right filing status can make a big difference in your tax bill. If you are single and have a child or other dependent, you may be able to use the head of household filing status.
This may be true even if the child's other parent claims the dependency exemption.
in general, filing as head of household will lower your tax rate and increase your standard deduction with respect to the single deposit or married filing separately.
again, if your spouse died and you have a child qualification, you may be able to file as a qualifying Widow (er) with a dependent child for two years after the death of your spouse.
Education expenses can score you a tax credit.
Make sure to account for educational expenses you had this year, including books and supplies to see if you qualify for the American Opportunity Tax Credit.
you may be eligible for as much as $ 2,500 to cover those costs, and that it is not only based on tuition. You can also request the cost of related fees, books, supplies and equipment for yourself, your spouse and dependents.
However, the credit you can claim is reduced to levels higher incomes.
another popular education credit is the learning credit for life, which can save you up to $ 2,000 in taxes.
Your maximum Lifetime Learning credit is also reduced as your adjusted gross income increases changed, but there is no limit to the number of years you can claim.
How do you think your total tax benefits for dependents are this year?
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