1/19/2012 1:28 PM ET|
The tax joys of parenthood
Children can be a boon at tax time, offering a variety of ways to reduce what you owe. Here's how taxpaying parents can benefit.
Is there a new baby in the house? That's good news in many ways, especially at tax time, when the chip off the old block will help you chip away at your tax bill.
A growing family makes you eligible for a variety of tax savings. You get an additional tax exemption, may be eligible for several tax credits and can use tax-favored ways to save and pay for Junior's college. You might even be able to lower your taxes by shifting some of your higher-taxed income to your youngster, either as an asset gift or as salary if you own your own business.
Here are some common tax matters every new -- or experienced -- parent needs to consider.
The first tax-return item a taxpayer encounters is the choice of how to file. For many couples raising kids together, this is easy. The married-filing-jointly option offers a larger standard deduction and allows some tax breaks that are denied to unmarried filers.
If, however, you are raising children alone, don't shortchange yourself by choosing the wrong status. You can file as a head of household if, for more than six months, you provided more than half the cost of keeping up a home for yourself and your kids. Tax rates and the standard deduction for head-of-household filers are more favorable than those for the single or married-filing-separately categories.
Parents who have lost spouses also have a choice. You may file as a qualifying widow or widower with a dependent child for two years after the year your husband or wife died. This status gives you the same filing consideration afforded to married filers.
Exemptions, aka dependents
More child-related tax savings come from the personal exemptions you claim on your return. Each dependent is an exemption. The Internal Revenue Service sets an annually adjusted amount ($3,700 apiece on 2011 returns) that you multiply by the number of your exemptions and subtract from your income.
Determining whether your child is a dependent is not a problem when you have young kids at home. But what about when they earn their money from an after-school job or are off at college? While you may have to do a little figuring, especially to see if your young worker needs to file his or her own tax return, this generally won't invalidate your child's status as your dependent. The key considerations are whether you are the child's primary source of support or if he or she is a full-time student.
Single parents have some other matters to consider. Where a formal divorce decree is involved, be sure you follow the custody rules set out there. They determine who gets to claim the children. When custody is shared, parents must decide who claims the kids.
Your growing family could pay off via several tax credits. The great thing about tax credits is that they reduce your tax liability on a dollar-for-dollar basis. A credit of $500 could cut your $1,000 tax bill in half. If you owe no tax, some credits will even get you a refund.
The easiest child-related credit to claim is called simply that, the child tax credit. There are no records to keep or extra forms to file to get a $1,000 credit for each child younger than 17 who's claimed as a dependent on your tax return.
If you claim tax relief for more than one kid, you must fill out Form 8812 to compute the additional child tax credit, but the paperwork could be well worth it. This tax break allows filers who owe little or no taxes to get a refund check from the IRS.
Working parents who put the kids in day care can file for the child- and dependent-care credit to recoup some of those costs -- up to $3,000 spent to care for one youngster under age 13, and $6,000 for two or more preteens.
And if your child arrived via adoption, there's a tax credit for that, too.
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No wonder the USA is broke and in debt 75 TRILLION DOLLARS (15 Trillion plus 60 Trillion unfunded SS and Medicare promises). The tax breaks and deductions MUST STOP . They need to be completely eliminated. Overpopulation and poverty is destroying the planet and the dummy US Government is giving tax breaks for having children.
Currently 51% of Americans at the bottom PAY NO INCOME TAX AT ALL.
A family of four, two adults and two children, making $50,000. a year, only pay $767. in Federal Income Tax... or roughly 1-1/2 percent of their income!
And people have the nerve to bitch about those with income from dividends paying 15% in tax... when most are paying nothing or 1/10 of 15%??
No wonder the USA is broke. Time to eliminate all tax breaks and charge everyone 15%.
Those that don't help to bake the cake should not be allowed to eat the cake.
Well I know my comments will not go over to well and some will think that I'm not for family.
My wife and I do not have children but never the less we are a firm believer in personal responsibility. If you have children then they should be your responsibility not the government and not the citizens who pay higher taxes and have no deductions. Me and my wife pay more taxes then those with children and yet we do not use the public schools. We live debt free including our home with no mortgage. If you have a mortgage then your responsibility and if you have children your responsibility. Tax deductions are a form of wealth spreading. Why should me and my wife pay more taxes just because we take personal responsibility and live with in our means? I believe in a one tax percentage strait across the board and no deductions. This is in part why the country is in the shape that its in today because a lot of Americans think they are entitled to something that some one else pays for. And if you don't like products made in China then stop buying them. 90% of what me and my wife own are made right here at home in America. If we keep looking to the Government to solve our problems then the Country and the Government will continue to be divided. Take personal responsibility and solve your issue your self. Me and my wife live on a combined income of $46,000 a year after taxes and yes we live with in our means and on a cash basis. To this day we have never taken an unemployment check, welfare check or food stamps.
I believe Americans should get a tax break for two children and no more. Any more than two, you are a burden to society and a drag on the planet's resources. You are also a gluttonous pig. You should have to pay the full rate to educate any more than two children.
The Duggar family has 19 kids. They pay NO taxes because they have declared themselves a church. What if we all did that? Who would pay for the roads the Duggars drive on or ANY public service for that matter.These pigs and people like them are ruining the planet and don't care. People have been hiding behind religion and using it as a welfare system for far too long. I for one am sick of paying their way.
Tax breaks for kids SHOULD be eliminated. Parents with children receive more from the tax system than single adults and married couples without children. Our non-existant kids don't go to public school, don't ride the taxpayer funded school bus, and we don't receive for welfare.
America, a place where a single woman can have 5 children with 5 different dads and then claim each one of them on her tax return simply because she worked a "seasonal" 3 month long job. I know someone like that, and it irritates the heck out of me.
I am a 30 year old military wife with ONE child. Though I love motherhood, and love my child I could not see having 4 more. We've discussed possibly one more, but the way the economy is today I feel that if we did have even just one more then that would make it all the more difficult to help our child in the future. I never had hand outs, nor did I have help with college expenses other than a student loan (which I had to repay). I hope to lessen the burden on my own child by being able to help her with those types of expenses. It makes me wonder how on earth do these people having so many children plan to help their own children become responsible adults in such a harsh difficult world. Or do they even put this into consideration? I would think these kids would follow their parents "examples".
I was raised by a single mother who worked her a** off. She never once got state help, nor did she apply for food stamps. Instead she worked a full time and a part time job as well as managing to complete 2 associates degrees and a bachelors degree. My mom worked HARD. I learned about hard work through my own mother. I have also heard my mother on many occasions talk about how she wished she had started a college fund for me as a baby, even if it meant putting just a little in each month to help. She is one of the reasons I think so much about my own childs future.
Not only are there future college expenses, but there are activities as well. Obviously people with no money and 5 kids cannot afford a $100 soccer program for each child.
I do look at the child tax credit as a "handout". However we now look at it as a usefull handout that we have vowed to continue to deposit into our daughters "college/future" account each year as long as we continue to get it. We don't blow it, we set it aside for her.
These are my oppinions and if no one agrees so be it, this is the way I look at things, and I don't expect everyone to like what I have to say.
I agree with sqiggy. Tax breaks for kids needs to be reduced or eliminated. First off - having kids is a choice. For some - having kids means a tax break - yeah.
As ladislasdhoyos says: paying for private school - your choice. You could send them to public school.
It would be about time people think about the choices they are making. Having kids should be your own satisfaction and choice, but the government should not be handing out these tax breaks because of it.
Maybe I would get a tax break if government would stop the tax breaks to cover the choices people are making by having kids.
Maybe I would get a tax break if government would crack down on welfare recipients who are not deserving of it - like all the druggies who are NOT drug tested.
Your figure for how much Fed Income tax a family of four making $50K pays is only correct if they can take advantage of every single deduction, exemption, credit, etc. and claim the maximum aloud by all of those. This isn't the case for the average family. They also have to keep the record, itemize, etc when they file their return, which costs time and money. You are then forgetting FICA taxes, State, and local income, and other taxes.
You didn't strike me as a "Dito Head". The rhetoric of the extremists of both sides is why we are in the mess we are in. It used to be there was such a thing as a "Conservative Democrat", think Sam Nunn or Ed Jenkins, and a "Liberal Republican", but the extremist of the party leaderships like Pelosi, Reed, Obama, and the like have pushed them all out.
Notice that once the Liberal media had harpooned Cain's campaign, all discussion of Tax Reform, like 9-9-9 or the "Fair Tax" has disappeared. I wish I had paid as little in Fed Income tax as you claim I do last year. I would have gotten a couple more thousand added to my withholding refund.
Don't come down on the US for it's "birth rate". It is one of the lowest in the world. Europe is even worse. But the fact that most children in US live to adulthood, does make up for that. You have a problem with world over population, take it to problem. I.E. India, China, etc. and the rest of the "3rd world".
To packerbacker96- Just think, if people DIDN'T HAVE KIDS....WE WOULDN'T HAVE TO PUT UP WITH YOUR, REDICULOUS POSTS........
Most married couples BOTH work and contribute to the TAX base.....Geeeez were you born yesterday? You must be one of those Teabaggers that only want tax breaks for the RICH.....HUH!
In every state I know, property taxes pay for the schools. Plus we pay into the tax base with state tax on probably a lot more necessary items, like food. A family of 4, spends a lot more than YOU alone!!! I could list hundreds of things a family with kids buy, instead of the luxury items you probably buy.
You probably spend your $$$ on illegal things like DRUGS??? Oh I'll give ya credit for all the TAX you pay on the BEER ya drink.....LOL
To even suggest having a child just for tax reasons is absolutely inane, and having children without consideration for the impact on the planet is stupendously selfish (in spite of what some religions preach). Consider the following: At this moment there are over seven billion people on the planet and more than 260 born every minute as we speak. In the U.S. every child born today, that would be 10,800 new people today, will consume 45,000 pounds of metal in their lifetime through the products they purchase. During their lifetime they will use at least 2.8 gallons of oil per day and consume 123 gallons of water per day. They will purchase at least 17 million new vehicles per year, each of which will require an average of 6 times that number of new tires. Each person will produce approximately 273 pounds of personal solid waste and 1600 pounds of garbage per year.
Unless you have all the answers to the worlds resource depletion and environmental damage your contemplated child will cause… think again.
Let me add that I meant those that do not work and just stay at home getting knocked up. I didn't mean those that love children and have them.
Once again, a government program run out of control. How many kids is enough? While this is a personal issue, it becomes a social one when society starts paying for it. There needs to be a limit - the problem is that the child didn't create the problem, the fool that keeps having kids expecting the government to pay for them is the problem. Too often we hear of the people that keep having kids entirely because our government rewards them with more money for doing so.
I had one child, one that I knew I could afford to give a decent life/chance to. Sure I'd like to have had some more, but I did the responsible thing and refrained. Frustrating to watch others be irresponsible and be rewarded for it.
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