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Starting a Family Tax Solutions

Starting a Family

Kids are expensive! Luckily the government has included some fantastic ways to reduce your taxes. These benefits have changed drastically over the last few years, so be sure to discuss all of the changes and new potential tax savings with your tax guru.

Filing status

If you are single and you provide more than half of the cost of your child’shome, then you may be able to change your filing status to head of household. That would give you a bigger standard deduction and allow you to pay tax at a lower rate.

Employer tax withholding

An extra dependent can lower your tax bill. Avoid overpaying the government and ask your employer to file a new W-4 form. Click here to link directly to the IRS’s new withholding tax calculator app to make sure that you are maximizing your take home pay. The app can be confusing, so work with your tax advisor if you have questions on how to properly fill out these new forms.

Child Tax Credit

The new child tax credit can reduce your tax bill dollar-for-dollar by up to $2,000 per child. If you already pay little to no income tax, be sure to ask about the Additional Child Tax Credit which can be worth a refund of up to $1,400 per child per year!

Earned Income Credit

Many families rely on the earned income tax credit to help supplement their income. If you have even just one child, the ability to qualify for this credit and the benefit that you are eligible to receive more than doubles. The IRS takes great care in making sure that you are eligible for the benefit and they have some fantastic resources on their webpage that can be found here.

Child Care Credit

If you have earned income and pay for child care while you work, then be sure to explore the child care credit. The credit is worth between $600 and $1,050 for the first $3,000 of childcare expenses paid for your child under the age of 13. If you have two or more eligible children, then the credit is doubled.

Child career imbursement account

The child care reimbursement account is not as popular as it likely should be. It operates similar to a health savings account (HSA) in that you can divert up to $5,000 of your salary per year into a special account that you can then use to pay childcare expenses. The benefit comes from not paying any income tax, Social Security or Medicare taxes on the amount that you contribute to this account.

While these are the most common ways to experience tax savings for your new and growing family, there are also additional creative tax benefits that might be available to you in limited circumstances. Be sure to talk to your accountant frequently to make sure that you are benefiting from all of the tax benefits that you are eligible for.

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