Everything Parents Need to Know About Taxes
You probably have a to-do list the length of the Constitution.
And, speaking of Uncle Sam, one of the things that probably keeps getting bumped down the list is your taxes.
We’re here to help. When it comes to your taxes, LearnVest has you covered.
Today, we’ll share some of the most crucial tax information relevant to parents, including what you need to know to get all the credits and deductions you deserve in your exalted position of “Mom.” At the end, we even have a giveaway for you! Then, you can get your taxes done and turn your attention back to the fun things, like planning family game night.
Which Status to Take
If your child is living with you and you are taking care of him or her financially, you’ll never want to file as single (which has the fewest tax benefits), even if you are a single parent. You’ll instead file as “head of household” or as a qualifying widow, two statuses that recognize the financial and emotional support you are giving your child. If you are married, you should file as married filing jointly or married filing separately. Find out which filing status is for you with our flow chart.
Which Exemptions You Get
Each exemption you qualify for means a lower tax bill. If you have any children under 19 (including stepchildren and legally adopted children) living with you, you most likely can take an exemption for each of them, along with your spouse and yourself. If your child was permanently and totally disabled at any time during the year, she should be claimed as your dependent, regardless of her age.
Of course, the IRS wants to know that your kids are actually dependent on you. So you cannot claim your child as a dependent if:
- Your child is over 19 and not a full-time student
- Your child is age 24 or older at the end of the tax year
- Your child provided more than half of her own support
- Your child didn’t live with you for half the year (except in cases of illness, education, business, vacation or military services, or the child was born or died during the year)
- You are separated or divorced, and your child spends more time at your ex-spouse’s home. Learn more about this at the IRS website
Find out what other tax exemptions you qualify for here.
Which Credits You Could Get
If You Have a Child or Children Under Age 17 …
You could claim the Child Tax Credit, which can reduce your taxes by up to $1,000 per child. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit, which will refund you the difference even if you don’t pay any taxes.
In order to claim the Child Tax Credit, your answer must be “yes” to all of these questions:
- Was your child 16 years old or younger as of December 31st, 2011?
- Did you provide more than half of his support?
- Did he live with you for more than half of 2011?
- Was your adjusted gross income (AGI) less than $75,000 if you’re an individual, less than $55,000 if you’re married filing separately or less than $110,000 if you’re married filing jointly? (If this is the only “no” from the questions above, consult a tax advisor. You may still qualify for a portion of the credit! The credit is reduced by $50 for each $1,000 that the taxpayer’s AGI exceeds these thresholds.)
If the answer to all of these questions is “yes,” then you can take the Child Tax Credit.
If Your Child Is a Student or Taking Classes …
You could claim either the American Opportunity Credit or the Lifetime Learning Credit.
Education credits are claimed on the IRS form 8863. It’s important to note that you cannot claim the Lifetime Learning Credit and the American Opportunity Credit for the same student, even if she qualifies for both. What you can do is mix and match credits if you are paying for more than one student, choosing one credit for one, another credit for the other, and then switch the next year.
If you’re choosing between the two, we suggest taking the American Opportunity Credit. With it you can claim more expenses, and the credit can go up to $500 higher. Read more about how to get these credits.
Find Answers to All Your Tax Questions
Our Tax Center has help for every type of taxpayer!Check it Out
If You Had a Caretaker for Your Child …
You could claim the Child and Dependent Care Credit. You can claim this credit if you paid someone to care for your child under 13, or your spouse or dependent who was physically or mentally incapable of caring for themselves. You’ll have to provide the taxpayer ID of the care provider. You can take the credit if:
- You’re married and filing jointly with your spouse
- You (and your spouse, if married) were either looking for work, earning an income or a full-time student for five or more months of the year (meaning, if you were hanging out at the house, you can’t deduct the price of a caretaker)
- The dependent for which you paid for care lived with you for more than half the year
You cannot take the credit if:
- The care provider was someone you or your spouse can claim as a dependent
- The payment for the care was made to your spouse or the parent of the child
If You Adopted a Child
You can claim an adoption credit for up to $13,360 in adoption-related expenses, including:
- Reasonable and necessary adoption fees
- Court costs
- Attorney fees
- Traveling expenses (including amounts spent for meals and lodging while away from home)
- Other expenses that are directly related to adoption
Find out what other credits you could take here.
Our friends at H&R Block have hooked us up with one free H&R At Home Deluxe tax prep filing package, worth $29.95. The software is great for homeowners and investors, and comes with tax advice, audit support and more.
More on Taxes from LearnVest
Do you live in one of the ten most taxed cities in the U.S.? Find out.
If you commute from one state to the next, we have advice on how this affects your taxes.
If you are in the 25% tax bracket, you don’t pay 25% in taxes. Find out what you’ll really pay.