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Dependents – The Tax Benefits They Bring
Kids can be stressful at times, but the good news is they can save your butt during tax time. Today we are sharing some of the tax benefits that kids and other dependents bring to you.
Each child and dependent can bring you an exemption deduction of $4050. This means that the income that is subject to federal tax is reduced. If you are in the 15% bracket this could save you $607.50 and those in the 25% bracket could save $1012.
Child Tax Credit
The child tax credit is better than the deductions because your taxes are reduced dollar for dollar. This specific credit is an additional $1000 credit that is for children under 17. Married couples qualify if they don’t make more than $110000 and single parents qualify if they don’t make more than $75000.
Child and Dependent Care Credit
Uncle Sam understands that child care is expensive. Therefore, working parents or parents actively pursuing employment for dependents under 13 can claim the Child and Dependent Care Credit.
This credit is another dollar for dollar reduction of your taxes for up to 35% of your expenses. This equals $3000 for one child or $6000 for two or more children. Depending on your income 20% - 35% of your childcare expenses (based on your income) can be reduced. Nursey school, private kindergarten, daycare, and after school programs all qualify.
Earned Income Tax Credit
The Earned Income Tax Credit is available to W-2 employees and self-employed people who make less than a certain amount. How much you get depends on the number of children you have. Below is the credit table amounts for 2016.
- 3 or more children - $47955 ($54505 for married joint filers)
- 2 children - $44648 ($50198 for married joint filers)
- 1 child - $39396 ($44846 for married joint filers)
The credit ranges from $506 (no children) to $6289 (three children). The best part is this is a refundable tax credit so it can result in a refund.
The next time your kids are working your nerves remember that they save your butt big time during tax season. If you file with TurboTax, they will make sure that you get all of the tax credits you deserve when you file your tax return. All you have to do is answer a few simple questions.
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