Understanding Tax Credits As A Parent
Did you know that parents have individual tax credits for their children? Some of these might be used to defray your costs. Understanding tax credits as a parent can help you make ends meet.
Child Tax Credits
According to Tax ProEz, last season saw the addition of a due diligence checklist for the Child Tax Credit, the Additional Child Tax Credit and the American Opportunity Tax Credit. Most parents know that they can count their children as dependents on their tax forms. This is useful because it lowers the amount of taxes withheld from your paycheque. But, do you know about the other valuable child tax credits?
Parental Tax Benefits
The good government wants to encourage specific beneficial activities, such as parenthood. Allowing parents to deduct expenses paid for their children only makes sense. Think of how much money you spend on your children.
You buy them clothes, toys and pay for their school activities. Shouldn’t the government give you credit for being dutiful in paying these expenses? Here are a few of the more popular Child Tax Credits:
- Earned Income Tax Credit (EITC)
- Child Tax Credit (CTC)
- Additional Child Tax Credit (ACTC)
- American Opportunity Tax Credit (AOTC)
You might find that you can qualify for one, but not another. These tax credits may or may not be refundable. Refundable means you can get the money back with your tax refund. Wouldn’t that be nice?
IRS Cracking Down
Unfortunately, the American government is out of money. It passed its credit limit, and its debt is now higher than its revenue. The Internal Revenue Service (IRS) is trying to cut down on some credits to save money.
With children, their crackdown has been labeled as “due diligence.” It is similar to loans, where the banks make it more difficult to qualify. The same is true for Child Tax Credits.
The due diligence checklist for the Child Tax Credit is meant to determine who qualifies and who doesn’t. This is a refundable tax credit and very popular. The Internal Revenue Service is cracking down on tax filers.
The Child Tax Credit Checklist is Form 8967. This due diligence checklist for the Child Tax Credit has three pages and seeks to gain more detailed information on each child. There are questions concerning relationship, residency, citizenship, physical presence and so forth.
You can see if you qualify for the Child Tax Credit. Just be warned that it will be more challenging to qualify due to new IRS rules. If you do qualify, you could save some money.
If you need help with your taxes, reach out to us today! We have the tools you need to understand how to get the most money back.
References:
What is the Child Tax Credit (CTC)? | Tax Policy Center
The Issue of Due Diligence… | Tax ProEz
What is the Earned Income Tax Credit (EITC)? | Tax Policy Center
American Opportunity Tax Credit: Questions and Answers | IRS
