Posts Tagged ‘Dependents’

Eight Opportunities For Parents To Reduce Their Federal Taxes

Tuesday, February 11th, 2014

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice. 

Eight Tax Savers for Parents

 

Your children may help you qualify for valuable tax benefits. Here are eight tax benefits parents should look out for when filing their federal tax returns this year.

1.   Dependents.  In most cases, you can claim your child as a dependent. This applies even if your child was born anytime in 2013. For more details, see Publication 501, Exemptions, Standard Deduction and Filing Information.

2.   Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17 at the end of 2013. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more about both credits, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.

3.   Child and Dependent Care Credit.  You may be able to claim this credit if you paid someone to care for one or more qualifying persons. Your dependent child or children under age 13 are among those who are qualified. You must have paid for care so you could work or look for work. For more, see Publication 503, Child and Dependent Care Expenses.

4.   Earned Income Tax Credit.  If you worked but earned less than $51,567 last year, you may qualify for EITC. If you have three qualifying children, you may get up to $6,044 as EITC when you file and claim it on your tax return. Use the EITC Assistant tool at IRS.gov to find out if you qualify or see Publication 596, Earned Income Tax Credit.

5.   Adoption Credit.  You may be able to claim a tax credit for certain expenses you paid to adopt a child. For details, see the instructions for Form 8839, Qualified Adoption Expenses.

6.   Higher education credits.  If you paid for higher education for yourself or an immediate family member, you may qualify for either of two education tax credits. Both the American Opportunity Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See Publication 970, Tax Benefits for Education.

7.   Student loan interest.  You may be able to deduct interest you paid on a qualified student loan, even if you don’t itemize deductions on your tax return. For more information, see Publication 970.

8.   Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child under the Affordable Care Act. It applies to children under age 27 at the end of the year, even if not your dependent. See Notice 2010-38 for information.  

Forms and publications on these topics are available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

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Important Information for All Parents

Tuesday, January 24th, 2012

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

IRS Reminds Parents of Ten Tax Benefits 

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at www.irs.gov or by calling 800-TAX-FORM (800-829-3676).

 

“Dependents”, “Exemptions” and Tax Benefits

Wednesday, January 26th, 2011

This area of the tax laws can become very complex, very quickly, principally due to the myriad of actual personal life situations that exist in the world today.  For example, married, single, head of household, domestic partners, taxpayers who are living together but are not married, or children, married older children living at home while attending college, divorced, separated, foster parents, adopted children, relatives, etc, etc.

Two important terms that are being presented in this article are “dependents” and “exemptions.”  A “dependent” is someone who is dependent upon you for some or all of their support.  Support in this context may be financial (money) or in-kind (food, shelter, expenses etc). An “exemption” reduces your “Taxable Income” on your tax return. Each ”exemption” that you claim on your tax return is the equivalent of a $3,650 tax deduction.  Generally speaking, you are allowed one tax “exemption” for yourself, one for your spouse (married taxpayers), and one for each of your qualified ”dependents” on your tax return.

Generally, you must provide more than half of the total annual support each year for a qualified person(s) before you are entitled to claim that person(s) as a dependent.  However, suppose that you and your three sisters are each providing one fourth of the total annual support for both of your elderly parents?  In this situation you should review ”Multiple Support Agreements” on page 19.  

One of the best references to explain the applicable provisions fo the tax laws for these two subjects is IRS Publication 501 (“Exemptions, Standard Deduction, and Filing Information”)  Here is the link:  http://www.irs.gov/pub/irs-pdf/p501.pdf     Specifically, read pages 3-21.  You also may need to consult with your tax preparer or tax advisor.  There are three tests that must be met for “exemptions” (page 10) and five tests for a qualifying child (pages 11-21)  There are provisions in the tax laws for many (if not most) of the actual real-life situations.  You will find a section for a child who was born alive but later died, stillborn children, foster care parents, students, and either divorced or separated parents.

There are also other tax law provisions, if you are the parent of a qualifying child:  (more…)