Calendar Recipe Box Shopping List Address Book
      
 
 

Your Precious Little Tax Deduction

Your Precious Little Tax Deduction


A baby brings untold joy -- and a few tax savings!


by Paula Vuksic, CPA

  Print: Full Page
Text Only
  Email: Article
   Find: More Articles


The birth of your child — especially your first — can be an emotional roller coaster. Through the mixture of excitement, stress and happiness, many parents forget about the tax breaks their bouncing bundle of joy provides for them. Consequently, many fail to take advantage of these breaks, losing out on significant savings.

For starters, your child saves you $3,400 right off the bat as an additional dependent! And with a child tax credit here; a dependency exemption there, long-term, Section 529 plans, the savings can really add up. The cost of children usually outweigh the tax relief they provide, which is more reason to squeeze out every bit of tax advantage you can.

If you have the time and the patience, many deductions can be researched on the Internet. Keep in mind that there are federal tax rules and state tax rules to be aware of and so the addition of a child sends many previous do-it-yourselfers to an accountant well versed in the latest local and federal tax code.

But first, a cautionary note: the following figures are general amounts, and some of these deductions and credits are phased out when taxpayers reach a certain level of income. Please consult your personal tax advisor in assessing the benefits available to you.

The Dependency Exemption
First and most obvious is the additional dependency exemption, a deduction of $3,400 for new parents. In addition to the exemption, there is a child tax credit, which allows a maximum credit of $1,000 for each child. And for parents who have chosen to go back to work, there’s the child and dependent care credit, which allows deductions of up to $3,000 for the first child and $6,000 for two or more children on expenses related to child care.

In conjunction with the child care credit, parents can exclude up to $5,000 from their gross income to reimburse for child care expenses through the employer dependent-care assistance program. Expenses which are excluded from income are not eligible to be put against this credit. Anything under $5,000 that is not spent once again returns to taxable income.

Without a doubt, your little bundle of joy can be a bundle of savings when tax time rolls around.


Paula Vuksic is a CPA and tax professional with Citrin Cooperman & Company, LLP, one of the leading accounting and tax firms in the New York metropolitan area. She’s also a new mom who has taken advantage of every tax break the IRS has to offer. She can be reached at pvuksic@citrincooperman.com.



Enter your email address to receive delicious, family-friendly recipes, exciting promotions, helpful articles and more delivered right to your mailbox. What could be better?





HyperLink


Finding a Financial Advisor
With tax time around the corner, now is the time to think about getting your finances in order.
View Full Article

Review Your Personal Finances
An annual review of how you’re doing is surprisingly helpful and surprisingly painless.
View Full Article

Organizing Household Property Records
Taking careful inventory of your valuable possessions will give you peace of mind-and save you a lot of trouble in the event of a catastrophe or life change.
View Full Article

Correcting Your Credit Report
Once you understand your credit report, it's easy to correct it.
View Full Article

Your Credit Card and Your Budget
If you understand your budget, paying off the credit card will be easier
View Full Article




 
  








 
Simply fill out the required fields to begin enjoying the benefits of FamilyTime.com – it’s fast and it’s free.
* required



 
 
Concerned about privacy? Rest assured, we never sell or share your personal information.
See our Privacy Policy.
//