As every parent knows, kids are expensive. If you are the parent or caregiver of a child, there are some tax breaks that can help make those expenses a little less painful.
First things first…
If you are a new parent, there are a few things you will want to do before exploring any tax breaks that you may be eligible for. These steps will help make sure you are eligible for tax deductions and credits related to your child, and can help avoid unhappy surprises come next tax season.
- Get a Social Security or Individual Tax Identification number for your child. In order to claim parental tax breaks, you must have your child or dependent’s Social Security number, Adoption Tax Identification Number, or Individual Tax Identification number. Confirming a child’s birth is the only way the IRS can verify that your are eligible for the credits and deductions you claim on your tax return.
- Check your withholding. A new family member might make you eligible for new credits and deductions, which can greatly change your tax liability. If you need to adjust your withholding due to these changes, provide your employer with an updated Form W-4, Employee’s Withholding Certificate, to change how much tax is withheld from your paycheck.
Check eligibility for tax credits and deductions
- Child Tax Credit. If you claim at least one child as your dependent on your tax return, you may be eligible for the Child Tax Credit, which may take thousands of dollars off your tax bill.
- Child and Dependent Care Credit. If you paid someone to take care of your children or another member of your household while your worked, your may qualify for the Child and Dependent Care Credit regardless of your income. For example, you may be eligible to claim up to 35% of your daycare expenses with certain limits.
- Adoption Tax Credit. This credit lets families who are in the adoption process during the tax year claim eligible adoption expenses for each eligible child. You can apply the credit to international, domestic, private and public foster care adoptions.
- Earned Income Tax Credit. The Earned Income Tax Credit helps low- to moderate-income families get a tax break. If you qualify, you can use the credit to reduce the taxes you owe – and maybe increase your tax refund.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.