Any parent knows that raising children can be a costly venture. However, there are some ways to save money on the expenses that come from having a family. Tax credits and deductions for parents often result in a higher refund or a lower amount owed. Below our tax attorneys in San Francisco have put together six deductions and credits parents can use to offset their tax bill:
Child Tax Credit
The Child Tax Credit is available for each qualifying child under 17 years of age. The credit was created to offset the expenses associated with raising children. For the tax year 2018, $2000 is the maximum amount parents can receive on each child for which the tax credit is claimed.
Health Insurance Deduction for Self-Employed Parents
Self-employed individuals with children, such as independent contractors or sole proprietors, may be able to deduct health insurance premiums for any children under 27 years of age. Those who are self-employed can typically deduct 100 percent of the cost of health insurance premiums, such as medical, dental, and long-term care, for the aforementioned children. However, the dollar amount of the deductions cannot exceed the amount of money earned from the business, and this deduction is only available if the parents were not eligible for an employer-sponsored insurance plan.
Child and Dependent Care Tax Credit
Parents may have the option of claiming the Child and Dependent Care Credit if they pay another individual to care for minor children 13 years of age or younger so that they can work or leave home to actively seek employment. This credit may be worth as much as 35 percent of the money paid to the person who provided the care, based on the parents’ yearly income and the number of dependents. The maximum credit is $3000 for the 2018 tax year.
American Opportunity Credit
The American Opportunity Tax Credit can be claimed by parents who are paying expenses for the first four years of their children’s post-secondary education. Expenses that can be claimed include tuition, enrollment fees, school materials, and course-related books for which the educational institution does not pay. It is similar to its older version–the Hope Scholarship Credit–however, it allows parents to claim this credit for four, instead of two years of post-secondary education.
Adoption Tax Credit
Parents may qualify for the Adoption Tax Credit if they can prove expenses that were related to adopting a child. These include court costs, attorneys fees, adoption fees, and fuel expense to travel to where the child is located to claim him or her for adoption. Those planning to claim the Adoption Credit should know that they are required to use a special 1040 Form to which an adoption-related document is attached.
The Lifetime Learning Credit
The Lifetime Learning Credit is very similar to the American Opportunity Credit, but it is not limited to four years. Rather, it continues on indefinitely, as long as the parents’ child or children are enrolled in higher education courses. Qualified expenses include school materials, enrollment fees, and tuition.
If you have questions about whether or not a certain tax credit is applicable to you, we urge you to contact a tax attorney in San Francisco.
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