graduation-child

Ten Tax Tips for Taxpayers with Children and Students

Do you have children? Having children or students enrolled in higher education will most likely change your tax situation. Below you will find 10 things you should consider before filing your taxes.

Dependents – In most cases, a child can be claimed as a dependent the first year they were born. There are however a few exceptions to this. Refer to the IRS publication 501 – Exemptions, Standard Deduction, and Filing Information.

Child Tax Credit – For each of your children under age 17, you may be able to take this credit. If you only qualify for a partial credit instead of the full Child Tax Credit, you may be eligible for the Additional Child Tax Credit. Even if you don’t owe any tax, you may still be eligible for the Additional Child Tax Credit which is a refundable credit and may give you a refund. See IRS Publication 972, Child Tax Credit

Child and Dependent Care Credit – If you work or are looking for work and you have to pay someone to care for your child under the age of 13, you may be able to claim this credit. See IRS Publication 503, Child and Dependent Care Expenses.

Earned Income Credit – The EITC or EIC is a great benefit for taxpayers who work and have earned income from wages, self-employment or farming. The EITC reduces the amount of tax you owe and may also give you a refund. See IRS Publication 596, EIC Table to see if you qualify and check your AGI in the EIC table.

Adoption Credit – If you adopted a child you may be eligible for a tax credit covering your qualifying expenses paid to adopt an eligible child. qualifying expenses paid to adopt an eligible child. See the instructions for IRS Form 8839, Qualified Adoption Expenses.

Children with Earned Income – If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.

Children with Investment Income – Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents.

 

Student Tax Tips

Coverdell Education Savings Account – This savings account is used to pay qualified educational expenses at an eligible educational institution. Contributions are not deductible, however, qualified distributions generally are tax-free. For more information see IRS Publication 970, Tax Benefits for Education.

Higher Education Credits – Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see IRS Publication 970.

Student Loan Interest – You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.