When it comes to children and taxes there are a few very important things you absolutely must know.
As children often end up at the middle of emptying your wallet, it is only fair that you know how to maximize the tax savings that your children can bring you.
Essentially, the tax savings associated with your children shake out into two very distinct areas.
One, you may be able to claim him or her as your dependent. Two, you may be able to claim certain credits related to children.
Let’s talk about children, dependents, and exemptions. Don’t look at me like I am crazy, I will explain.
If you provide over one-half of the care for your child during the year, you generally are able to claim your child as your dependent.
Every dependent on your tax returns is worth a deduction of over 3,600 dollars which comes off your adjusted gross income for tax calculation purposes.
The second way that children decrease the amount of tax you owe is because of the child tax credit and the child and dependent care tax credit.
The child credit is worth $1000 of pure tax savings that is deducted from your final tax owed for each of your kids that you provided support for during the year.
The essential thing to note with this credit is that it is a credit and not a deduction which reduces your final taxes owed by 100% of the credit.
Yet another credit to consider along with the tax credit described in the last paragraph is the child care credit.
If you paid out childcare expenses to a qualified school or daycare while you were at work, then you could be eligible to receive up to $6,000 in tax credits for these expenses. Not too bad, huh.
Hopefully, this has shed some light on how you can take advantage of some of the tax savings benefits that are available for your children.
Want to learn even more tax savings and tips such as the ones in this article, click Tax Credits Online. Tomas Sangold has written about energy credits, tax credits for improvements to your home, retirement tax credits, and so much more.