Your children may be worth more than you think. Here are some tax benefits you may be able to utilize when filing your tax return this year.
Dependents: are worth $3650 as an exemption, a child can be claimed as a dependent in the year they were born.
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. This could be worth $1,000 if your income is below $110,000 married or $75,000 single.
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. This credit can be between 20% to 35% of qualifying expenses (up to $3,000 for one child and $6,000 of expenses for two or more children).
Earned Income Tax Credit :The EITC is a benefit for certain people who work and have earned income from wages or self-employment (generally less than $45,000 of income). EITC reduces the amount of tax you owe and may also give you a refund. This could be worth as much as $5,666 with three children.
Adoption Credit : You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. This credit can be up to $13,170 per eligible child.
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. This credit can be up to $2,500 if your adjusted gross income is below $160,000 married or $80,000 single.
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. This deduction can be up to $2,500 though phased out at adjusted gross incomes between $120,000 and $150,000 married and $60,000 to $75,000 single.
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 dependant.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).