Tax season is more often than not met with grumbles and a chaotic race to file. While agonizing over taxes can be stressful and time-consuming, it can also be a great way to save and earn money for your family. We talked with Lisa Greene-Lewis, a Lead CPA for the American Tax and Financial Center at TurboTax to find out all the ways your taxes can pay you back. Need more incentive? According to TurboTax, upward of one billion dollars goes unclaimed by taxpayers each year.
The Benefits of Having Kids
When it comes to your taxes, having children and dependents is a blessing. According to Greene-Lewis, claiming dependents is one of the biggest areas taxpayers make mistakes. Children are dependents if: they are children under age 19 by the end of the year, under age 24 by the end of the year and a full time student, are permanently and totally disabled (at any age), have lived with you for more than half of the year, have not provided more than 50% of their own support for the year and are not filing a joint return for the year. Check out these two deductions for having children:
Child Tax Credit: For each child under 17 you can claim the Child Tax Credit, which is a $1,000 credit.
Child and Dependent Care Credit: If you pay for any sort of childcare (nursery school, private kindergarten, after school programs and day care all qualify) for children under 13, you can claim the Child and Dependent Care Credit, which can be worth up to $2,100.
Children Aren’t Your Only Dependents
There are a few different kinds of dependents that the Internal Revenue Service recognizes and lets you claim on your taxes. Children are of course dependents, but so are relatives. Relatives are dependents if they aren’t being claimed as a qualifying child of any other taxpayer, are related to you (by IRS specifications), are living with you full time (such as a live-in boyfriend of or girlfriend whose relationship doesn’t violate local law), meets the gross income test and receives more than half of their support for the year from you.
The Earned Income Tax Credit
While you qualify for a bigger tax credit when you have children, you don’t have to have children for the Earned Income Tax Credit. If you have three or more children and earn up to $45,060, two children and earn up to $41,952, one child and earn up to $36,920 or no children and earn up to $13,980 you can receive this refundable tax credit ranging from $475 to $5,891. The restrictions here come if you are married and file separately or if you share custody and the child lives in your household for less than half of the year.