Westward Group for Tax and Estate Planning Advisors Tokyo Paris Review: Tax Tips for New Parents
When I say kids are expensive, I’m not telling you anything you don’t know. But man, they are expensive. Once you accept that, you may want to shift your paradigm. Since you already committed to this parenting racket, you might as well make the most of it. And financially speaking, that means tax breaks. Here are X deductions that you should be sure not to miss this tax season:
Child Tax Credit You can claim up to $1,000 for every kid under 17 in your household. This sum is phased out when married couples’ adjusted gross income exceeds $110,000 and $75,000 for single parents.
Don’t make this mistake: Be sure to file for a Social Security number as soon the baby is born. The hospital should have the paperwork.
Earned Income Tax Credit If you have three or more kids and earned less than $46,997 as a single person, or $52,427 as a married couple in 2014, you can take this credit. If you have one or two children you may also qualify if your income is very low. The maximum credit is $6,143.
Child care for kids aged 13 and younger, qualified child care, day camps and before- and after-school programs qualify for the dependent care tax credit. This means that most families can deduct up to 35 percent of the costs for care, for a maximum of $3,000 for one kid, or $6,000 for two or more family members.
Don’t make this mistake: Collect the tax ID or Social Security number of any care providers.
Flexible spending accounts Take advantage of your employer’s flexible spending account for both health care and dependent care. The maximum you can shelter is $5,000 for qualifying dependent care. Don’t make this mistake: Remember to spend down any FSA account and get reimbursed for expenses before any deadlines. Medical expenses if you had excessive medical expenses (not counting insurance premiums), you can deduct total family health care expenses exceeding 7.5 percent of your adjusted gross income. This means that if your 2014 adjusted income was $100,000 and you spent $8,000 on your and your family’s medical expenses, you can deduct $500. Don’t make this mistake: Collect receipts for all medical expenses throughout the year, including dental care and any prescribed therapies (including prenatal yoga and prenatal vitamins). Consider scheduling elective procedures before year’s end.
Adoption costs if you adopted a child and the process was finalized in 2014, you are eligible for up to $13,190 per child in federal tax credits.
College contributions did you start a college fund? Most states offer tax deductions for residents who invest in their state-sponsored 529 college savings plans. Deadline for taking the deduction in 2014 in most states is Dec. 31 of this year.
If the birthdate is 2014, claim that kid! Even if your baby popped out at 11:59:59 on Dec. 31, deduct away.
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