2nd Generation Indians in the US: Did you know that you can avail Family Tax Deductions and Credits?
In the US, due to various practical and cultural causes, many families reside in their multi-generational homes. Over more than 60 million Americans tend to live with their families due to the various benefits this can offer. Sometimes, living together with families can be the reason for certain chaos; however, the advantages would always be more than chaos.
If you are an Indian staying with your family in the US, then while filing your tax returns there are certain benefits related to family which you must be aware of. You must ensure that you are taking the advantage of these tax deductions and credits while you file your tax returns.
Tax deductions on home
If you are the owner of a house, then you would be eligible to claim certain tax deductions. Let us check out some of these deductions.
In case, you have origination fees or points being paid for your new house to obtain a particular rate from your lender then that fee is deductible from your taxes. Moreover, if you had paid points when your house was purchased then you would be able to deduct those points in the year you had paid them. In the case of refinancing your home, you would have to do a points deduction over the loan life.
In case of a home purchase with the help of a home loan then you must have paid the mortgage interest. You are eligible to make a deduction for the mortgage interest that has been paid during the current tax year and has been reported on Form 1098.
- Taxes on property
Taxes paid on property are very expensive and can be deductible from your taxes if you have paid them. For the tax year 2020, your taxes on property or State Income tax withholding should not be more than $10,000 in total.
Tax Benefits on Family
As a parent, you would be able to avail various tax benefits while filing your tax returns.
- If your child is below the age of 13 years and was using daycare facilities in the last year then you would be eligible to claim the Child and Dependent Credit. For one dependent child, you can claim up to 35% of the $3000 that has been incurred in the daycare. For two or more than two dependent children, you would be able to claim up to 35% of the $6000 incurred in the child-care expenses.
- If you are working, then another tax benefit that would be advantageous for you is the Earned Income Tax Credit. If your family has three kids, then you can claim a tax deduction of up to $6,660. Last year around 25 million taxpayers were able to receive the Earned Income Tax Credit and the average Earned Income Tax Credit for each taxpayer would be around $2,476.
- Under the tax reforms, the dependent exemption was eliminated. But by the Child Tax Credit, you would be able to claim up to $2000 for each child who is below the age of 17 years and is a dependent. In case of your children being above the age of 17 years, you can claim the credit for non-child dependents which would be $500.
- You can also be eligible to avail of the American Opportunity Tax Credit (AOTC) if your kids are dependents and are studying in college. The American Opportunity Tax Credit is a refundable tax credit that would be up to $2500 for each student for the first four years of their college.
- In case, you are not qualifying for the American Opportunity Tax Credit, you can avail the option of Lifetime Learning Credit. The limit for this credit is up to $2000 for each tax return and you can claim it even if your dependent has attended one class in the college.
Financial support for elderly family members
If you have been providing monetary support for your parents or grandparents, then it is feasible to claim them as dependents while filing your tax returns.
- You can be a qualified relative to claim dependents only when you have provided more than half of the financial support for your parents/grandparents in the year 2020.
- In the year 2020, the taxable income of your dependents must have been less than $4300.
Hence, you might be staying in a nuclear family or a joint family setup; you must be aware of the tax deductions which you can claim for your dependents and family members.