Being a parent is perhaps one of the most important responsibilities in life.
It changes your life as well as your finances.
And that’s why the IRS provides multiple tax deductions for it.
Why not lower your taxes and get all of the tax deductions you qualify for?
Whether your child was just born, is off to college, or somewhere in between, there are several deductions to look into.
Remember to check the IRS website for further details.
1. Dependents – In most cases, a child can be claimed as a dependent in the year they were born. For more information see 6 Important Facts About Dependents, IRS Publication 501.
2. Child Tax Credit – For each child under 17, you may be able to take this credit on your tax return. For your 2010 tax return, it’s $1,000 per child. For more info, see Child Tax Credit, IRS Publication 972.
3. Child and Dependent Care Credit – You may be able to claim the credit if you pay someone to care for your child under age 13, so that you can work or look for work. For more information see Child and Dependent Care Expenses.
4. Earned Income Tax Credit – The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. Earned Income Tax Credit reduces the amount of tax you owe and may also give you a refund. For more information see Earned Income Credit.
5. Adoption Credit – You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you are claiming the adoption credit, you must file a paper tax return because adoption-related documentation must be included. For more information see Qualified Benefits FAQs, IRS Form 8839,.
6. Children with Earned Income – If your child has income earned from working they may be required to file a tax return. For more information see Earned Income Tax Credit Rules, IRS Publication 501.
7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see 4 Facts Every Parent Should Know about Their Child’s Investment Income, IRS Publication 929.
8. Higher Education Credits – Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see Tax Benefits for Education, IRS Publication 970.
9. 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. For more information see Five Ways to Offset Education Costs, IRS Publication 970.
10. Self-employed health insurance deduction – If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27.
For more info, visit the IRS website.
Featured in Totally Money Carnival #5, the Superbowl Edition, hosted by Live Real Now.
Photo: Casey Serin