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Remember your children at tax time
You love your children. You’d fling yourself in front of a speeding locomotive to protect them.
Here are eight reasons to appreciate them even more when you’re preparing your tax return:
1. Dependents – In most cases, you can claim a child as a dependent from the year of birth until the year the child turns age 19 (age 24, if a full-time student). Each dependent reduces your taxable income by $3,700 in 2011.
2. Child Tax Credit – You may be able to take this credit of up to $1,000 for each of your children under age 17.
3. Child and Dependent Care Credit – You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work, look for work or, in some cases, attend school.
4. Earned Income Tax Credit (EITC) – The EITC is a tax benefit for lower-income people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax they owe and may give them a refund.
5. Adoption Credit – You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child.
6. Higher education credits – The American Opportunity and the Lifetime Learning credits are education credits that can reduce your federal income tax dollar for dollar.
7. Student loan interest – You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions.
8. Self-employed health insurance deduction – If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent.
The technical information here is necessarily brief. No final conclusion on these topics should be drawn without further review and consultation. Please be advised that, based on current IRS rules and standards, the advice contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty assessed by the IRS.
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