Posts Tagged ‘dependant tax deduction’
Dependent Tax Deduction - Tax Savings For Parents
Posted by admin in Tax Credit Vs Tax Deduction on March 8th, 2009
Ask any new parent, and they will tell you that the costs associated with a new baby are many, everything from bottles to diapers to cribs, strollers, and high chairs, and all of this before the child even learns to walk and talk and beg you for a pair of $500 designer jeans. Parenting is one of the most rewarding, and important jobs that a person can have, in addition to being one of the most expensive. The good news is that there are two tax breaks offered by the federal government that the majority of parents can qualify for, which are the dependent exemption and the child tax credit.
The dependent exemption is a tax break that allows you to receive an additional tax deduction of as much as $3,000 each year until your child turns 19. This is addition to the standard tax exemption that the IRS allows per person to cover basic living expenses. Single people are allowed one exemption, while married couples have the option of taking two of these exemptions per year.
The amount that you will save with this exemption depends on your current tax bracket, and generally, the higher the tax bracket, the more money you will receive, unless your income is too high to claim an exemption, but again, most people will qualify. This dependent exemption is only phased out for married couples filing jointly with an adjusted gross income of more than $300,000. Limits for single parents exist as well, and it is important to research these limits, both for married and single parents, to be sure that your income does not exceed them. If you qualify for this exemption, you can simply fill out the required lines on your tax form, including an adoption taxpayer identification or social security number for each child.
The child tax credit is available for married couples filing jointly with a reported gross income of below $13,000, although again, it should be noted that income limits for both single and married parents are revised frequently. With this credit, it is possible to receive up to $1,000 per child.
Determining the amount of credit that an individual can claim requires the completion of the child tax credit worksheet, which can be downloaded from the IRS website. You will need to provide a social security or adoption taxpayer identification number for each child in order to qualify. As with all tax information you should always check with a professional because tax laws can change every year.
By: Kelly Renaul
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Eight Ways to Reduce Tax Burden For Parents
However if you are single, you are allowed to file under the status “head of household” meaning they beat the amount of standard deduction and more beneficial tax bracket range. However, to qualify yourself as the head of household, you have to pay more than [...]
Who Counts as Your Dependent /Tax Deduction?
If a student child with earned and unearned income is eligible to be claimed as a dependent by the parents, must the parents claim them as a deduction even though it is more advantageous to both the parents and the child if they don’t?
Dependent Child of Divorced or Separated Parents
Many parents who find themselves in the midst of a dissolution action may have looming questions regarding tax obligations and entitlement to claims of tax credits or deductions.
This is especially advantageous to low income parents that have kids below the age of 16 or a young person still enrolled in school full-time. dependant tax deduction. This particular Tax Credit is based upon the number of children in [...]
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What Is The Child Tax Credit?
Posted by admin in Tax Credit Vs Tax Deduction on February 27th, 2009
How Does A Tax Credit Work?
As you know, raising a family is a full time job and can put stress on your finances. Fortunately, you can claim a tax credit to help cut your IRS bill if you have kids.
Getting a Tax Credit for Your Kids
With a tax deduction, you are reducing the total amount of adjusted gross income you have. For instance, if you earned $50,000 dollars in 2005 and take a $1,000 deduction for something, you’ll have to pay tax on $49,000 dollars in earnings. Put another way, the $1,000 tax deduction will save you a hundred dollars or so in the amount you have to send to the IRS.
A tax credit is a beautiful thing. It is designed to reduce the amount of taxes you on a dollar for dollar basis. Taking our example above, you would not deduct a $1,000 tax credit from the $50,000 you earned. Instead, you would go to the tax tables and determine the amount of tax you owe on the $50,000. Let’s say the tax tables reveal you owe $9,000. You would reduce this amount by the $1,000 tax credit and pay $8,000 dollars to Uncle Same. Put another way, tax credits are tax deductions on steroids!
If you are raising children, you may be able to claim a tax credit for each one. They must be under 17 at the end of the tax year, a U.S. citizen, your child and a dependent. Adopted children fit within the tax credit as do stepchildren and certain foster children.
This tax credit, however, does have some limitation. The primary issue is something called the phase out. If you make more than a particular dollar figure, the tax credit is either reduced or eliminated depending upon your particular circumstances. The phase out start when your adjusted gross income exceeds the following amounts:
1. Married filing Jointly: $110,000
2. Married filing Separately: $55,000
3. All Other Designations: $75,000
It is important to keep in mind that this tax credit is not a profit center. If you owe the IRS $4,000, but can tax a tax credit for 5 children, you will not get $1,000 back from the IRS. Instead, you tax bill is simply canceled out.
Claiming Child Tax Credits For Qualified Children
Child Tax Credit You may be able to claim a child tax credit if you have a qualifying child. A qualifying child is a child who [...]
$1000 CHILD TAX CREDIT details explained
Remember this is a tax credit and not a tax deduction, i.e. you subtract the child tax credit directly from the taxes you owe to the IRS and not the taxable income. This tax credit is in addition to the Child Care Tax credit or [...]
Obama budget would give typical family tax cut
An expanded $1000 child tax credit would be made permanent, as would an expanded $2500 tax credit for college expenses. Families making up to $160000 a year would be eligible for the full college credit.
I have 3 kids and am only receiving $1192 child tax credit. It says it is because my tax liability is less than full credit amount. What does that [...]
Child Tax Credit Stimulus
One very good aspect of the stimulus proposal currently in the House of Representatives is the way it expands eligibility for the Child Tax Credit. As CAP helpfully explains here the CTC is currently “partially refundable” and has [...]
Depending on your income and the age of your children, you could score a hefty income tax credit and possibly earn a tax refund. In 2008, more lower-income workers will qualify for a larger refundable tax credit.
About The Author
Richard A. Chapo is with the tax site - http://www.businesstaxrecovery.com - providing information on taxes. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.
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