Tax season can be a stressful time for many parents, especially those with children 17 and under. It is important for parents to be aware of certain tax tips before filing their taxes. One key point to remember is that the child tax credit has reverted lower for 2023 compared to previous years when it was expanded due to COVID. While the credit is still up to $2,000 per child, taxpayers with one or two children may see a lower credit for their children under age 17 than in 2021. This credit can be claimed alongside the standard deduction and helps reduce the total tax bill, according to experts.
Another important aspect for parents to consider is the child and dependent care credit and deductions. This credit is available for expenses paid for a qualifying child for day care, as well as for dependents who are not able to care for themselves if certain requirements are met. Additionally, up to $3,000 per child (up to $6,000 total) can be deducted for child care costs. It is also possible to deduct up to $5,000 per year in pre-tax dollars if you have a dependent care program through your employer. However, tax professionals caution against double dipping, meaning that if you take $5,000 in pre-tax dollars, you can only deduct up to $1,000 in remaining dependent care expenditures before reaching the $6,000 maximum.
Congress is currently considering expanding the child tax credit, which could potentially provide a boost for eligible taxpayers. While the legislation is not final and the timeline for its passage is uncertain, experts advise against waiting to file taxes until the legislation is passed. If the changes are approved, the IRS will calculate any adjustments due and automatically send payments to eligible filers. It is important for taxpayers to stay informed about any potential changes in tax laws that may affect their eligibility for credits and deductions.
An essential requirement for claiming a child as a dependent is to ensure that they have a Social Security number. This may seem obvious, but it is a crucial step in the tax filing process. Without a Social Security number for each child, parents will not be able to claim them as dependents on their tax return. It is advised to check that all children have been issued a Social Security number before filing taxes to avoid any complications or delays in claiming relevant credits and deductions.
As tax season approaches, it is important for parents to be mindful of these tax tips to maximize their savings and ensure compliance with IRS regulations. By staying informed about changes in tax laws, such as potential expansions of the child tax credit, parents can take advantage of available credits and deductions to lessen their tax burden. Consulting with a tax professional can also provide valuable guidance on navigating the complexities of tax laws and optimizing their tax return. For more tax season coverage and resources, individuals can visit the AP’s personal finance hub for additional information and guidance.
