Does your tax return properly reflect your current family circumstances? If you are raising children, your answer can determine how much federal income tax you owe. Here are two reasons.
- Filing status. Choosing the correct filing status affects your standard deduction and tax brackets. For instance, say your child lives with you for more than half the year in a home for which you pay more than half the upkeep, and you are considered unmarried at the end of the year. In that case, you may be able to claim “head of household” filing status.
For 2013, the $8,950 standard deduction for head of household filing status is $2,850 higher than the standard deduction for a single taxpayer. In addition, the upper limit of the 15% tax bracket for the head of household status is $48,600. When you file single in 2013, the 15% tax bracket ends at $36,250.
- Credits. Tax credits directly reduce the amount of tax you owe. When you have dependent children, you may be able to benefit from federal income tax breaks such as the child tax credit. For 2013, the maximum child tax credit for each qualifying child is $1,000. Depending on your income, part of this credit may be refundable, which means you could receive a refund even if you owe no income tax.
Other available tax breaks include the earned income credit, the child and dependent care credit, and education credits when you pay tuition and other costs for your college-age children.
Please contact us any time your family situation changes. You can count on us to help you determine what benefits are available to you.