The Tax Benefits of Parenthood (Yes, there are some)

Stephen Ganns, https://gannsblog.wordpress.com, remarks on the tax advantages of parenthood. Tax benefits for parents are often a relief because we all know, when you’re a parent you need all the help you can get. There are different tax benefits that parents can take, the simplest of which is the deduction for each dependent child, which does get phased out as incomes rise.

Another benefit is the Child Tax Credit. This is a maximum credit of $1,000 per child and is applicable to any child under the age of 17, so if your child is 16 or under, you qualify. The credit is reduced by the amount of income you have to the point of having a zero value for higher incomes.

In a household where there are two parents and both work, or there is one parent and that parent works, the Child and Dependent Care Credit is available to those parents. This credit also applies if one or both of the parents are disabled, or if they are actively looking for work. The idea of this credit is to help you afford after-school programs, nursery school and the like for your children so that you can work. You cannot get this credit if one person is working in the home as a non-financially compensated homemaker because that person is not earning taxable income.

The Earned Income Tax Credit is another credit available to parents. The Earned Income Tax Credit is for people who make less than approximately $51,000 a year. The credit goes up depending upon how many children you have. While this credit is also available to taxpayers who are not parents, it produces much better benefits to taxpayers with children.

Another type of credit is for parents who are thinking of adopting. This is a very generous credit and greatly offsets the burdensome cost of adoption.

So when your children reach the age of 17 and are no longer eligible for the Child Tax Credit and they choose to go to college, then as parents you are now eligible for higher education credits such as the American Opportunity Credit, or Lifetime Learning Credit. You also can deduct student loan interest while your child is a dependent.

If you are self-employed, you can get a deduction for health insurance you pay for your child, which you can cover up to the age of 26, even if that child is not a dependent.

Again, as we all know, there is no amount of credit or deduction that can offset the cost of raising a child from birth through college, but it’s nice to know that the IRS is trying to give us a little something to offset the financial burden.

Now, if only they would also babysit or drive them to karate lessons!

Stephen J. Ganns

Stephen J. Ganns, CPA
914-682-7007
steve@gannscpa.com
www.gannscpa.com

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