Tax Tips for Families
Engaged? Watch Your Withholding!
Always make sure that before you get married, make sure you and your spouse have enough withholding taken out. Reasoning is that if you made a decent sum of money and your spouse did not, there may not be enough withholding between the two of you. This is because payroll service only withholds enough to cover your tax liability. It doesn’t know about your spouse’s income. Be sure you adjust your withholding accordingly.
Talk to a tax professional before you file separately.
When you file separately you get punished. You lose out on many deductions and credits while putting yourself in a higher tax bracket. If you are worried about not getting your tax refund because your spouse owes a back tax liability, you can still file a joint return. You just attach an injured spouse form for the federal and the state. This will allow the IRS and state governments to send you a portion of your joint refund (which would most likely be higher than filing separately).
Get Money for Dependants.
Dependents are vital to saving money on any tax return, but make sure you are claiming them properly. A qualifying child must meet the following criteria.
||Must be your child, stepchild, foster child, sibling, stepsibling, or a descendent of these.
||The child must have lived with you for more than half the year. With the exception of certain divorced or separated parents. Also, there may have been a leave of absence when a child goes to school
||The child must be under the age of 19, under the age of 24 and a full time student, or totally and permanently disabled.
||You provided more than 50% of their support throughout the year.
Don't forget about other relatives too.
||Must be your parent, stepparent, grandparent, aunt, uncle, in-laws, or anyone else who is a relative but not a qualifying child.
||They must not exceed $3,500 in gross income.
||You must have provided more than 50% of their support.
||They must have lived with you for the entire year. However, certain relatives do not have to live with you.
You can always consider adoption.
The IRS will give you a dollar for dollar refundable credit on your adoption expenses up to $13,170. However, if you adopt a child with special needs, you can receive the full credit regardless of how much you’ve spent on the adoption.
Save for your kids education.
You can put up to $2,000 per year into an Education Savings Account (ESA) for your child. Just remember, the contribution isn’t deductible, but the investment growth is tax deferred.
Your child goes to school, but you get the credit.
Many think that because their son or daughter is going away to school, that they cannot be claimed as dependents and they lose their child’s education credits. The truth is that leaving home for education is considered a “Leave Of Absence”, which allows the parent to claim the child and their education credits.
If you’re divorced it’s your turn to claim the kids, you need to be ready.
Divorce decrees no longer hold any value in the eyes of the IRS. You must have a signed form 8332 from the custodial parent giving you consent to claim the child.
For form 8332, CLICK HERE.