There are few things more exciting than welcoming a new child into your family, but that also means taking on the added costs that come with being a parent. Diapers, formula, baby equipment, and even toys can very quickly put a major drain on your finances.
Having a new baby in the home can be exhausting, and having the additional weight of less free money at the end of each paycheck can lead to stress for a lot of parents. The good news is that there are several tax credits that may well help ease the financial strain.
Even if your new baby was born on the last minute of the last day of the year, you can claim your child in next years taxes. The amount for your exemptions in your 2015 taxes is $4,000 per person. Counting you, your spouse and your new child, that’s $12,000.
The standard deduction this year for a couple filing jointly is $12,600. Add that with your personal exemptions and you’re up to a $24,600 reduction of your taxable income. So if you earned $54,600 you would only pay taxes on the remaining $30,000.
But there’s more tax savings you can get. Read on for more tax savings.
Earned Income Tax Credit
For 2015 for taxpayers filing jointly with one child, the maximum EITC amount is $3,359. Keep in mind though that to qualify, your income must be less than $44,651 if you have one child.
Child Tax Credit
There’s another $1,000 tax credit parents receive for every child under the age of 17. For a couple filing jointly with one child, you must earn between $9,666 and $110,000 to get the full credit.
Child Care Credit
You can deduct up to 35 percent of the costs of daycare and after school programs up to $3,000, which is $250 per month. This credit is helpful for parents who both work and have to return to work and hire someone. Be sure to keep your records though.
If your family had a lot of medical expenses in 2015, you can deduct some of them. You are allowed to deduct family health care expenses that exceed 7.5 percent of your income.
Just how much that is depends on how much you earned. For example, if your adjusted gross income is $70,000, you can deduct any medical expenses over $5,250 or 7.5% of your income. So if you had $6,500 in medical expenses you would have a deduction of $6,500 – $5,250 = $1,250.
Keep in mind though that monthly health insurance premiums don’t count.
If you chose to adopt in 2015 you are eligible to deduct qualified adoption expenses up to $13,400.
To make sure you get all these credits, go to a tax professional and mention the items in this list to ensure you qualify for all of them.
You can also choose to file yourself using programs like TaxAct or TurboTax. You won’t have to worry about adding these credits in yourself, as the program should automatically fill them in for you.
The tax laws and amounts mentioned above are for the 2015 tax year, which are the taxes you file in April 2016 of course.