Tax Savings for Families with Kids
It’s getting to be that time of year when everyone is working on their tax returns for the previous year. With some careful research, you may be able to deduct many expenses for your family and children. Today we’re giving an overview of tax savings for families with kids as a starting point for your research.
Per Child Tax Deduction
There is a standard $1,000 deduction offered per child in your household. This includes children, step-children, foster children, siblings or grandchildren in your care. They must be under 19 years old, or 24 if they are a full-time student. Some lower income families may be eligible for more than the $1,000 standard deduction depending on their income level and number of children.
Childcare Tax Credit
Officially called the child and dependent care credit, this tax break is a real money saver for families where both parents work and children require childcare. Parents can reduce their tax bill by up to $3,000 for a single child or $6,000 for multiple children. Both parents must have an income or be actively looking for work and you must have paid a person or childcare facility for childcare. This tax break applies to children under 12 as well as a spouse or dependent that is unable to care for themselves. Consider filing for the child and dependent care credit if you have a nanny or use daycare, aftercare, or holiday care for your kids. Even summer day camps can apply if you are working during that time.
Many families are happy to know they can deduct medical expenses as well. This includes well and sick doctor’s visits, prescription and OTC medications, necessary medical treatments, transportation to health care providers and healthcare premiums. There’s more good news when it comes to breastfeeding: You can deduct the cost of your breast pump and breast pump accessories. Just remember, medical expenses must be itemized so keep a list of these throughout the year.
Depending on your income level, you may be able to deduct some of your child’s college tuition. The deduction is usually between $2,000 and $4,000 based on education expenses and household income. Additionally, Educational Savings Accounts allow you to invest up to $2,000 tax free as long as the money is used towards college education in the future.
Be sure to research your options for flexible spending when it comes to medical and childcare expenses. Some employers allow you to set aside pre-tax funds for these necessities. While you may have to fork over the money earlier than usual, it can save you a significant amount in the long run.
We hope these tips for tax savings for families with kids encourages you to check with the IRS about potential deductions, exemptions and tax credits that apply to your family. They say having kids is expensive but you can do your best to save some money when tax time rolls around.
Sources: TurboTax, Mom.me and What to Expect