9 Ways Your Children Can Save You On Your Taxes!
May 5, 2017 – If you have both a job and young kids, you probably also have summer camp expenses. Summer camp is not cheap! SummerCamp.org estimates that a “full-season” (7 to 9 week) session will set parents back on average $3,500 to $11,000 per child.
On the bright side, some of your summer camp costs and other expenses that come along with childcare and children in general may allow you to qualify for a tax credit. Here are 8 facts you should know about deductions and credits available for parents that can help lower your tax burden.
1. The cost of day camp may count as an expense towards the child and dependent care credit. The credit can be up to 35 percent of your qualifying expenses, depending on your income. (Overnight camps do not qualify.)
2. Dependents: In most cases, a child can be claimed as a dependent in the year they were born.
3. Child Tax Credit: You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax.
4. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child under age 13 while you work or look for work. Be sure to keep track of your child care expenses so we can claim this credit accurately.
5. Earned Income Tax Credit: The EITC is a benefit for certain people who work and have earned income from wages, self-employment, or farming. EITC reduces the amount of tax you owe and may also give you a refund.
6. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt a child.
7. Student Loan Interest: You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income, so you do not need to itemize your deductions.
8. Tuition and Fees Deduction. Make sure your tax pro is up to date on tuition and fees deductions for qualified education expenses. This can reduce the amount of your income subject to tax by up to $4,000. You can’t claim this deduction if your filing status is married, filing separately or if another person can claim an exemption for you as a dependent on his or her tax return.
9. College Savings Plans. Yes, they do grow up so fast and before you know it you’re not only talking about college, you’re paying for it. For parents anticipating college tuition, a 529 plan is available in most states and works as a tax shelter for savings earmarked solely for post-secondary education.
As you can see, having children can make a big impact on your tax profile. Make sure that you’re getting the appropriate credits and deductions. Keep all your summer camp receipts! If you need a tax pro to help you or answer questions, call us today!