Until they reach the age of eighteen, kids are legally the responsibility of the parents. And with great responsibility comes great bookkeeping hacks. No one ever said raising kids was cheap, and the IRS has been known to cut many a break for parents who are struggling to pay their bills. With that in mind, we advise you take advantage of these tax breaks by doing a little bookkeeping. In short, we want you to keep track of these deductions, save your receipts, and anything else to get a little more green in your pocket.
1. The Child Tax Credit
This tax credit is an important part of filing your federal taxes. It could be worth as much as $1,000 for each qualifying child, depending upon your combined family income. Important things to remember about the child tax credit:
- To qualify for the credit, your child must have been under the age of seventeen or sixteen by the end of the tax year.
- The child must also be your son, daughter, foster child, or stepchild. They can also be a younger brother or sister, stepbrother or stepsister, adoptive child, or even a descendant of any of these. This includes a grandchild, nephew, or niece.
- If the child has a job, they must not provide for more than half of all their expenses.
- In order to qualify for the tax credit, the child is required to be a U.S. citizen, national, or resident alien.
- The Child Tax Credit begins to phase out if individuals filing for it make more than $55,000. It also phases out for those making over $110,000 if filing jointly.
- And of course, the child must be claimed as a dependent on your tax return. Bringing us to:
2. The Dependent Exemption
Every time you file taxes, you are allowed to take an exemption just for being single or two exemptions if you are married. It sounds ridiculous on its surface:
Are you paying taxes?
Yes.
Are you a person?
Yes.
Here’s some of your money back.
However, this rule also allows you to exempt anyone under the age of nineteen who is living with you. This exemption can be filed for in addition to the above.
3. The Child and Dependent Care Deduction
Those who pay someone to care for their child or a dependent so they can work can claim this deduction on their tax return. The Child and Dependent Care Deduction is available to those who are working or are even looking for work. It is valid as long as they pay for child care services for dependents under age of thirteen. The deduction is also available for those who pay for care for other types of dependents who cannot care for themselves including aging parents, ill spouses, etc.
4. School Expenses
If you are paying any kind of expenses associated with education, you may also be able to deduct these costs or receive credit on your tax return. There are many such credits your local bookkeeper can make you aware of. These include the American Opportunity Credit that allows for up to $2,500 for tuition and related expenses to attend college for each of the first four years. There is also the Hope Credit, Lifetime Learning Credit, and even other bookkeeping hacks for those who pay for private school on a K-12 basis.
5. The 529 Plan
Are you saving for your child’s or children’s college tuition? Your state has a bookkeeping hack for that, also known as a 529 plan. The plan offers many tax breaks and is a sort of investment for your child’s future. The earnings that come from the investment are tax-deferred, and withdrawals for approved educational expenses are exempt from federal income taxes. In addition, your earnings can be used at many accredited colleges and vocational schools across the country. With two different options for the plan in Texas and many firms offering them, it is only a matter of picking your favorite.
Bookkeeping Hacks in Houston
And if you are in need of an expert bookkeeper for your family or business in Houston, please contact me.