All parents know the high cost of raising children. But did you know that your children can help you benefit from certain tax advantages? Here are some tax benefits that the IRS wants parents to know about.
Child tax credit. You may be eligible for this credit on your tax return for each of your children under the age of 17. Each credit is worth $ 2,000 per child. Married couples who file jointly must have an income of less than $ 400,000 to receive all or part of this credit.
Credit for child care and dependents. You may be able to claim the credit if you pay someone to look after your child under 13 so you can work or look for work. The credit can go up to $ 4,000 of eligible expenses to care for a child under 13, or up to $ 8,000 for two or more children.
Earned Income Tax Credit. The EITC is a benefit for some people who work and have earned income from salary or self-employment. The EITC reduces the amount of tax you owe and can reimburse you as well. Married couples filing jointly, with three or more qualifying children and an income of less than $ 57,414, can receive up to $ 6,728 for the Federal Working Income Credit.
Adoption credit. You may be entitled to a tax credit for eligible expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper return, as the adoption documentation must be included. For 2021, the maximum adoption credit is $ 14,440 per child. Taxpayers whose modified adjusted gross income is less than $ 216,600 will be entitled to the full amount of this credit.
Child with earned income. If your child has earned income from work, they may be required to file an income tax return. If a child’s earned income is less than $ 12,550, no federal income tax return is required unless federal income tax has been withheld.
Children with investment income. Children pay their own low tax rate on investment income less than $ 2,200. When a child’s investment income exceeds $ 2,200, it will be taxed at the parent’s higher rate.
Higher education credits. Education tax credits can help parents offset the costs of a college education. The American Opportunity Tax Credit and Lifetime Learning Credit are educational credits that lower your federal income tax dollar for dollar, unlike a deduction that reduces taxable income. You may be eligible for a credit of up to $ 2,500.
Student loan interest. You may be able to deduct the interest you pay on a qualifying student loan. The deduction is claimed as an income adjustment, so you do not need to itemize your deductions. The maximum deduction is $ 2,500 for student loan interest.
Deduction for self-employed workers’ health insurance. If you were self-employed and paid for health insurance, you may be able to deduct the premiums you paid for coverage for any child under the age of 27 at the end of 2021.
After you’ve paid for your child’s expenses throughout the year, be sure to claim all deductions and tax credits you are entitled to.
Barry Lisak is an IRS registered agent, which means he has passed special exams from the US Treasury Department that qualify him to represent clients dealing with audit or tax resolution cases. Any questions can be addressed to (516) TAX-SAVE or to email@example.com.
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