5 Easy Tax Tips for New Families

As more Millennials get married and have children I figured it would be a good time to lay out some tax tips before April is upon us.

I am willing to bet that not many in the world enjoy tax season, I know I don’t. But I hope I can give you some tips to help understand the tax world. Now, I am not a CPA and I am strictly passing on information that I have researched. So if there are any questions or concerns you want more information on please contact a CPA.

1. Make Sure You Have All Your Tax Documents

I know this may seem easy, but in today’s world some of your tax documents come via mail and many are found online.

Tax documents include:

  • Health Care Statements (1095-A, 1095-B, 1095-C): These are needed as verification that you had health insurance over the past year since it is now required.
  • Income/Deduction Statements (W-2, 1098 Forms, 1099 Forms)
    • W-2 is what you get from your employer so you can report what you made to the IRS.
    • 1098 Forms are for those who either have a mortgage or student loans as you can deduct your interest expense from each.
    • 1099 Forms include any other income including investments and self-employment income.

2. There Are a Lot of Great Tax Deductions

There are great tax deduction opportunities to reduce your taxable income (the amount of income you report). This allows you to save on the amount of taxes you have to pay, which means keeping more money in your pocket. Deductions can include the number of children you have, if your pay for day care, property taxes and car registration fees in certain states, plus many others.

3. Children Provide Tax Credits

For new parents, or parents who had another child, don’t forget about the $1,000 Child Tax credit. This directly reduces your tax bill by $1,000 if you had a child in the previous year. It doesn’t matter at what point you had your baby either. This is different than a deduction as it directly reduces your tax bill dollar-for-dollar. (For related reading, see: 5 Budgeting Steps for Young Families to Follow.)

4. Contribute to an IRA or HSA Account

When you contribute to an IRA for retirement or a health savings account for healthcare expenses, you may be eligible for certain tax deductions based on the amount you put in and your income level. Plus when you contribute to an IRA you are preparing for whatever the next stage in your life might be and an HSA account is perfect for family planning. 

5. Don’t Be Afraid to Ask for Help

If you are in doubt, make sure you contact a professional CPA. I asked my CPA what he thought of TurboTax and he said that if you are single and work for a company, TurboTax works great, but if you run your own business it pays to use a CPA. CPAs can definitely be worth the expense as they may find credits and deductions that you didn’t know you qualify for. After all tax law is their job.

This year, be proactive about your taxes and start now. If you haven’t started organizing your tax documents, it’s better to start early than doing it the night before they are due. Hopefully this quick guide can help ease some stress and give you back some time with your family. There are many other resources that can help you find the best option for you. (For more from this author, see: 10 Common Habits That Can Increase Wealth.)