Check Out These Tax Benefits for Parents

Taxpayers with children may qualify for certain tax benefits. Parents should consider child-related tax benefits when filing their federal tax return:

• Dependent. Most of the time, taxpayers can claim their child as a dependent. Taxpayers can generally deduct $4,050 for each qualified dependent. If the taxpayer’s income is above a certain limit, this amount may be reduced.
• Child Tax Credit.  Generally, taxpayers can claim the Child Tax Credit for each qualifying child under the age of 17. The maximum credit is $1,000 per child. Taxpayers who get less than the full amount of the credit may qualify for the Additional Child Tax Credit.
• Child and Dependent Care Credit. Taxpayers may be able to claim this credit if they paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. Taxpayers must have paid for care so that they could work or look for work.
• Earned Income Tax Credit. Taxpayers who worked but earned less than $53,505 last year should look into the EITC. They can get up to $6,269 in EITC. Taxpayers may qualify with or without children.
• Adoption Credit. It is possible to claim a tax credit for certain costs paid to adopt a child.
• Education Tax Credits. An education credit can help with the cost of higher education. Two credits are available: the American Opportunity Tax Credit and the Lifetime Learning Credit. These credits may reduce the amount of tax owed. If the credit cuts a taxpayer’s tax to less than zero, it could mean a refund. Taxpayers may qualify even if they owe no tax.
• Student Loan Interest. Taxpayers may be able to deduct interest paid on a qualified student loan. They can claim this benefit even if they do not itemize deductions.
• Self-employed Health Insurance Deduction. Taxpayers who were self-employed and paid for health insurance may be able to deduct premiums paid during the year. 

 


Source: Internal Revenue Service

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Parents' Election To Report Child's Interest and Dividends - Form 8814

Parents can elect to include a child’s income on the parent’s return (Form 8814) when a child’s only income is interest, dividends or capital gain distributions. If making this election, the child does not have to file a return. The child must meet the following conditions to qualify:

• At the end of the year, must be younger than age 19 or a full-time student younger than age 24
• Must have gross income of less than $10,500
• Must be required to file a return unless the election is made
• Must not file a joint return for the year
• Must not have made estimated tax payments for the tax year, and no overpayment from the previous year can apply to the tax year under his name and Social Security number
• Must not have any federal income tax taken out of his income under the backup withholding rules

If you elect to report your child’s income on your return, you cannot take certain deductions that your child could take on his or her own return such as:
• Additional standard deduction of $1,550 if the child is blind, 
• Penalty on early withdrawal of child’s savings, and
• Itemized deductions such as the child’s investment expenses or charitable contributions. 

If your child received qualified dividends or capital gain distributions, you may pay up to $105 more tax if you make this election instead of filing a separate tax return for the child. This is because the tax rate on the child’s income between $1,050 and $2,100 is 10% if you make this election. However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions.

Form 8814