Posted on | February 14, 2010 | 1 Comment
How To Save Taxes: Tips For Parents
It’s only a new parent that knows how much cost is associated with any new baby – you need to buy bottles, diapers, a crib, high chair, and stroller – all these are needed even before the child learns how to walk and speak and be able to ask you for a pair of designer jeans worth $ 500. Even though it is expensive, parenting is an important and very rewarding job for any person to do in life. There is good news for the parents however. The federal government has offered 2 tax breaks, one being the dependant exemption and the other is the child tax credit, so that they can prepare with proper financial planning for their family.
Around $ 3000 per year worth of deductions from your taxes can be obtained through the dependant exemption tax break till your child is 18 years old. This is an extra benefit the IRS provides over and above giving the standard exemption of tax covering basic expenses of livelihood. Single parents can take only one exemption and married couples can opt for both these exemptions every year.
Your savings through this exemption are determined in accordance with the tax bracket you are in; the higher this bracket, the more your savings will be as long as your income is not high enough that it does not qualify for any exemption. The dependant tax exemption is restricted for married couples who jointly file and have an adjustable total income higher than $300,000. Certain limits exist for single parents as well; so it’s important for you to take some time to consider these facts for both single parents and married couples in order to know that your income is within that limit. In case you qualify, you will then need to fill out the particular section of the form and supply the certification of adoption, or the children’s social security numbers.
The other tax break, child tax credit, can be availed by married couples having a total income not more than $ 13,000 and who file jointly; again, remember that the income limits frequently get revised. With this tax credit, up to $ 1000 can be received per child.
For claiming the credit amount, one needs to first complete the worksheet for child tax credit available in the IRS web site. A social security number or an identification number for adoption will be required for qualification. It is advisable to consult a professional for your tax plan and tax information as the taxation laws get revised from time to time.