Raising a family in today's financially-strained economy is a challenge for many parents. With many families working outside the home to support their families, and cost of living expenses rising, many still find themselves struggling to make ends meet. There are definite benefits to raising a family in today's economy in the form of significant tax breaks. In comparison to a single person, families can save a significant amount of money in tax breaks. Here is a look at some of the tax breaks that are available to families in the United States.
Child Tax Credit
One of the more well-known tax credits for families is the Child Tax Credit. This tax credit is the equivalent of $1,000 per child, and there is no limit per family. Multiply the number of children under the age of 17 you have by the $1,000 per child credit, and that is the amount that will be deducted from your tax bill for the calendar year. In order to be eligible for the Child Tax Credit, married couples must have an annual gross income of less than $110,000. Individuals who are married and filing separately must make less than $55,000 and single parents less than $75,000 per year. The Child Tax Credit can help families receive a tax refund check instead of owing a tax balance.
Child and Dependent Care Credit
Another tax credit that is highly beneficial to American families is the Child and Dependent Care Credit. For families where both parents are working outside the home, or a single parent is supporting his or her family by his- or herself, a child and dependent care credit may be available. There are some restrictions and guidelines in order to be eligible for this credit. You are allowed to file for a credit of up to 35% of your total annual child and dependent care costs or a maximum of $3,000 for one child and $6,000 for two or more children. Additionally, the child or dependent must have lived with you for more than half of the calendar year and be put in the care of another so that you can work or look for work.
Families can opt for a $3,800 tax exemption per qualifying child. In order to be considered a qualifying child, parents must provide more than 50% of that child's care during the year. The child must live with you for at least half the year, be under the age of 19 if not enrolled in college, or under 24 years old if enrolled in a college or university for at least five months of the calendar year. Exemptions can help tax-paying families reduce the amount of tax they pay throughout the year.
Family tax credits are not just for natural parents, but adoptive parents as well. Du e to the high costs associated with adoption, there is an adoption tax credit. The 2012 adoption tax credit is $12,650 per child and can help to reduce the amount of taxes you owe for a calendar year. It is important to note that in contrast to the 2010 and 2011 calendar year, when you file taxes for 2012, the adoption tax credit is not refundable. Essentially, this tax credit can reduce the amount of tax you owe, but it will not contribute to a tax refund.
American Opportunity Credit
Many parents of college students are eligible for tax credits as well. The American Opportunity Credit is a tax credit for parents helping their children obtain a college education. The maximum credit per student is $2,500. As with the other tax credits, the American Opportunity Credit does have some restrictions and guidelines. In order to be eligible for this tax credit, individuals must make less than $80,000 per year and families less than $160,000 combined per year.
The Bottom Line
While raising a family is today's modern age is costly, there are tax breaks available. You are not limited to the amount of credits you can collect, as long as you are eligible for each. It is vital that you follow the guidelines for each very carefully, and if you have any questions regarding credits that you are personally eligible for, a tax professional is the best frame of reference.