4 Tax Benefits that you should not miss if YOU ARE PARENT?
4 Tax Benefits ,Being a parent is not easy and not is it cost-effective. Tax creditRight from the moment of birth, you must endure expenses such as diapers, baby food, toys and other essentials. It is possible that one might get a bit exhausted and hope for a quick break.
Well, the quick break is there for your taking in the form of tax benefits.You can claim your parenting related expenses, which will in turn lower your liable taxes via deductions and tax credits. Here is a list of few tax benefits that you as a Parent should not miss or ignore.
Child Tax Credit
Tax credits essentially lower your taxes dollar for every dollar spent. If you have a few kids, you can use these tax credits to lower your taxes by a considerable margin. However, you can claim the credits for only qualifying children. Here are a few conditions.
- You children must be below 18 years of age.
- Your children must be a citizen of the USA, or a resident alien or a national.
- You must declare your children as dependent on your tax claims.
- Your children must be living with you for at least half of a financial year.
- You can declare your own children, step children, foster children, half brother or sister, or a dependent such as grandchildren as your dependents.
You can claim the credits for several children, as long as you declare them as dependent and they are not listed as dependenton anyone else’s tax filing.
Adoption Tax Credit
With the help of adoption tax credit, you can easily offset some of the expenses related to adopting a child. Of course, there are few limitations when it comes to income and amount that you can claim per child. Here are a few expenses that you can claim under this clause.
- Travel expenses related to court.
- Food expenses related to court.
- Attorney and court related fees.
In the event that you adopt a child with special needs, you can claim the entire Adoption tax credit. Irrespective of whether or not it surpasses your actual expenses. Since it is non-refundable, you must ensure that it doesn’t exceed your actual tax liability.
Higher Education Credits
Sending your kid for higher education is not cheap these days. Here are two credits that you can avail.
- Lifetime Learning Credit (LLC)
- American Opportunity Tax Credit (AOTC)
You can use the AOTC for up to four years, whereas the LLC can be carried forward as long as your kid pursues education.
The following expenses qualify for the above credits.
- Tuition fees
- Enrollment related fees
- Expenses related to school materials
There are certain clauses in AOTC, which allows you for tax credit even if that results in zero tax liabilities.
Student Loan Deduction
You can avail deductions in your tax filing based on the payments that you have made for student loans. Since it is a deduction, you can reduce your net taxable income and thus lower the taxes.Here are a couple of conditions that are applicable.
- A student loan should come from a qualified institution.
- The loan should not be from any relative.
- There are certain income limits that apply to deductions.
- Your child’s enrollment for the degree should be more than half of the duration.
For the fiscal year 2016, as many as 19,273,883 taxpayers had opted for child tax credit. You can be one of them and save your hard earned money.