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Ten Ways Your Children Help You Save Big At Tax Time

By Edited Aug 31, 2015 0 0

The kids are lovingly referred to as "our little tax deduction" and this certainly appears to be true if you review all of the ways that your children may help you qualify for tax deductions and credits. 

1.   Claim your dependents.  The children are your dependents and take a prominent place on the front page of your 1040, the dependant deduction translates into bigger savings.
 
2.   Report Your Child's Income.  See Publication 501 for instructions and information on this requirement.  Generally any rise in tax burden is far outweighed by the benefits of the deduction. 

3.   Calculate the kiddie tax.  Special rules apply for children with a significant amount of investment income. See Publication 501, above.

4.   Buy insurance!  If you are self employed and purchased health insurance, the new health care plan permits a deduction for premiums you paid for your coverage and that of your children (can count up to age 27).  For more information go to the website IRS.gov.

5.   Pay for College!  Handy if you used the child's earned and investment income in order to accomplish this but, whatever the source, you are permitted to take a tax credit.  See Publication 970 for more information and instructions.

6.   Borrow to Pay for College!  Deduct some of the interest you have paid throughout they year for you or your spouse or children.  See Publication 970, above for instructions.

7.   Take the Child Tax Credits.  This is a dollar for dollar decution from your tax bill.  To find out if you are eligible for this credit, to work out the amount of the credit, and to carry over for an Additonal Child Tax Credit:  See Publication 972 for more information and helpful instructions.

8.   Hire help!  A portion of the amount paid for dependent care are deductible, on a sliding scale based on income.  See Publication 503 for instructions.

9.   Adopt a Child!  In addition to your new bundle of joy, you might be able to receive a credit against your tax bill for the qualifying expenses incurred.   Note:  you must file a paper return to take advantage of this credit.  See Form 8839, IRS.gov.

10.  Apply for EITC.  Designed fo the lower income wage workers, this credit for earned income gives the filer often more than the total of the tax bill.  See Publication 956.  

Make the most of your 2010 tax return by taking advantage of the tax benefits for parents. All forms and publications referenced are located at the IRS website or you can have them sent to you by dialing the IRS at 1-800-TAX=FORM (800-829-3676).

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