When you become a new parent, you understand how expensive—and joyous—it is to care for a child. Luckily for you, there are tax breaks to help you pay for some costs associated with a new child.
A new baby gives you one more deduction of $3,950 to reduce your income—even if they were born part way through the year.
If you’re not married or you’ve been separated for more than six months, you can claim the head of household status. That tax rate is significantly lower and will save you more money.
You may also qualify for child tax credit of up to $1,000 per child—depending on your income. This will offset your tax dollars and save you additional money.
Earned Income Tax Credit
Earned income tax credit offsets your taxes dollar-for-dollar. You can claim it even if it exceeds your tax liability. Consult with your tax advisor because there are special rules for claiming this credit.
If your children are in day care, you know how expensive that can be. But the child and dependent care credit lets you get some of that cost back if you work. Until your child turns 13 (no age limit for disabled children), you can claim up to 35% of the first $3,000 of expenses, and that increases to up to 35% of $6,000 for two or more children.
Your child doesn’t have to go to formal day care. Individual care qualifies, even if the caregiver is a relative or a child who is 19 or older. And nursery school, private kindergarten, after school programs and some camps qualify as well.
To claim the credit you must indicate the social security number of the caregiver on your tax return, and if you are married, both you and your spouse must have worked to show the need for day care.
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If you’re a parent with a new bundle of joy or not so new bundles of joy, Beaton Accounting will help you identify all deductions & save you money in every possible way.