Tax Basics Ch 4 Child related tax credits
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Adoptive parents may be able to claim a tax credit on their federal income tax return for qualified expenses incurred to enlarge their families. This credit can be claimed even if the adoption hasn’t been finalized. The can help parents pay for some of the costs they incurred to welcome a child into their families. There no longer are separate credit limits for an adopted child with special needs as long as the youngster is a U.S. citizen or resident. However, the timing of the eligible expenses affects the credit amount in international adoptions. The tax credit limit is for expenses associated with each adopted child, rather than an annual limit, and the credit can be spread over several years. However, the credit is progressively phased out for higher-income families. According to IRS Publication 968, qualified adoption expenses include: Reasonable and necessary adoption fees Attorney fees Some travel costs, including necessary transportation, meals, and lodging. Expenses related to surrogate parents or adopting a spouse’s child do not qualify for the credit. The credit also does not apply to expenses reimbursed by the government or private programs or for which an income tax deduction or credit already is allowed. Related Links: Related Articles: Ways to fund IRS payments SHARE: Bankrate.com
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Help with care costs
This credit covers a percentage of the costs a taxpayer pays to have someone care for young children. (It’s also available for any dependent, not just a child, or an adult who is unable to care for himself or herself.) There is a dollar limit on the expenses toward which you can apply the credit and the credit is larger for people who make less money. The dependent-care tax credit won’t cover your entire child (or other dependent) care costs, but it can help defray some of your expenses. Dependent care is increasing About one in four American families, or 22.4 million households, care for someone over the age of 50, according to the . The number of American households involved in caregiving may reach 39 million by 2007. About 75 percent of caregivers are women. Two-thirds of caregivers in the United States have jobs in addition to caring for another person. Most caregivers are middle-aged: 35-64 years old. Source: U.S. Department of Health & Human Services And be aware that you might have some other tax duties if you pay someone to look after your child, other dependent or spouse in your home. In this case, the IRS might consider you a household employer, meaning you are responsible for withholding and paying Social Security and Medicare taxes, as well as paying federal unemployment tax — collectively referred to as the nanny tax.Adoptive parents may be able to claim a tax credit on their federal income tax return for qualified expenses incurred to enlarge their families. This credit can be claimed even if the adoption hasn’t been finalized. The can help parents pay for some of the costs they incurred to welcome a child into their families. There no longer are separate credit limits for an adopted child with special needs as long as the youngster is a U.S. citizen or resident. However, the timing of the eligible expenses affects the credit amount in international adoptions. The tax credit limit is for expenses associated with each adopted child, rather than an annual limit, and the credit can be spread over several years. However, the credit is progressively phased out for higher-income families. According to IRS Publication 968, qualified adoption expenses include: Reasonable and necessary adoption fees Attorney fees Some travel costs, including necessary transportation, meals, and lodging. Expenses related to surrogate parents or adopting a spouse’s child do not qualify for the credit. The credit also does not apply to expenses reimbursed by the government or private programs or for which an income tax deduction or credit already is allowed. Related Links: Related Articles: Ways to fund IRS payments SHARE: Bankrate.com