Tax Deductions New Parents Need to Know AboutNews
Posted in on November 30, 2017
If you’ve had a baby, you likely are now eligible for many new tax deductions and tax credits that you were not able to take before. Talking with a Maryland tax lawyer about your eligibility for deduction is a smart move so you can make sure you claim the full value of deductions and credits that may be available. Some of the deductions that you could potentially claim now as a new parent include:
- An additional dependency exemption: In 2017, the exemption is $4,050. Since new parents have a new dependent, they can deduct this $4,050 from their taxable income. You do not need to itemize to take this deduction, but your eligibility phases out with an income of $261,500 or higher for single parents or $313,800 or higher for married parents. This deduction is available if your child was born at any time in 2017, so you can take the full deduction even if your child is born on New Year’s Eve.
- A child tax credit: If you have an income below $110,000 as a married couple, you can take a $1,000 child tax credit for each child you have. The credit is available even if you do not itemize, and because it is a credit, you get a dollar-for-dollar reduction in your tax bill. However, the credit is not refundable, although the Additional Child Tax Credit is if you are eligible for it. If your income exceeds $100,000 for married couples filing jointly or $75,000 for single parents, the deduction begins to phase out.
- The child and dependent care credit: Depending upon your income, you may be able to claim this credit to reduce your taxes based on how much you spend on child care. If your income is $15,00 or less, you can claim a credit for 35 percent of what you pay for care for your child while you are either working or looking for work. The maximum credit you can claim is $3,000 annually or $6,000 if you have multiple children. For workers with incomes of $43,000 or higher, you are allowed to claim only a credit for 20 percent of childcare expenditures. This credit can also be claimed even by tax filers who do not itemize their deductions.
- The earned income tax credit: Low income workers are eligible to take this refundable tax credit. You are eligible to claim the earned income tax credit if you have an income up to $39,617 if you are single or $45,207 if you are a married couple filing jointly if you have at least one qualifying child. Once you have a child, your maximum earned income tax credit is $3,400. If you have multiple children, your credit goes higher. The earned income tax credit is refundable, so you can receive this credit even if the amount you receive exceeds the amount you owe in federal taxes.
A Maryland tax lawyer like Kevin Thorn can help you to determine if you are eligible for these deductions or if there are other credits or deductions that you can claim to reduce your tax burden thanks to your new family member. Contact our office today.Share This Post