Thursday, April 02, 2009

Tax Advantages to Having Kids?

Apparently, the IRS wants you to have kids, and they have several ways to offset the cost of raising them.

The Child Tax Credit applies to qualifying children age 17 and under. This credit can be applied so long as your total tax due is more than the credit, and you meet certain income requirements (Modified Adjusted Gross Income under $110,000 for married filing jointly, $75,000 for single, and $55,000 for married filing separately). This credit can be up to $1,000 per qualifying child.

Taxpayers who do not meet those two criteria can still claim part of the credit and may be able to claim the Additional Child Tax Credit. See IRS Publication 972 to determine your total Child Tax Credit.

Additionally, if you have children under the age of 13 and you pay for childcare so you and your spouse can work, you may qualify for the Child and Dependent Care Tax Credit. This allows you to credit up to 35% of qualifying expenses.

Even better, these are not exclusive credits. If you have children who meet all qualifications, you can claim each of these credits, though certain other credits may reduce the amount you claim (such as the First Time Home Buyer Credit). As with all tax-related information, you should take the time to do the math for yourself, or ask a tax specialist.

Not that these tax credits should spur you to have a child. But, since the projected cost of raising a child to the age of 18 (not including college tuition!) is just shy of $200,000, parents need all the help they can get.

Blog Archive