All the Changes Parents Need to Know Before Filing Their Taxes This Year.
At this time of year, the inevitability of taxes (not to mention the cold season, laundry, etc.) can seem all-consuming. Over the past few years, there have been several tax adjustments regarding child deductions, write-offs, and how best to care for children with disabilities. People filing for themselves and looking for an easy read (142 pages) may want to check out IRS Publication 17 , Tax Guide for Individuals for 2023, but if that doesn’t sound like a fun way to spend the day, here’s a review. . Whether you recently had your first child or are going through it for the umpteenth time, there’s likely some new information to consider when preparing your taxes in 2024.
Child tax credit
During the first two years of the pandemic (is it over? I don’t know) , families received a stimulus package of up to $3,600 per child in the child tax credit , measured in monthly checks. Last year, that amount was reduced to $2,000 and became part of the lump sum return, meaning you may not owe as much in taxes if you count your dependents. There are several factors that determine whether your child is eligible for the program, but biological, adopted, adopted, and adopted children under the age of seventeen may be eligible for the program. Other relationships that may make someone dependent on you include siblings, step-siblings, grandchildren, and nieces or nephews if they are under seventeen years of age and under your care. They must live with you for more than six months and not generate more than half of their own financial support.
If your annual income is $200,000 or less ($400,000 or less if filing jointly), you are eligible for a $2,000 credit. Partial credits may be allowed for income above this amount. See the IRS website for applicable forms and additional rights . This year, if the tax credit qualifies you for a refund, up to $1,600 of your child tax credit could be refunded to you.
Children with disabilities
At the state level, children with disabilities may be eligible for other tax benefits. To receive additional credits, your child must first meet all the criteria for the Child Tax Credit. To be eligible for additional credits, they must be receiving early intervention or special education services as defined by the state. In addition, they must comply with the Individuals with Disabilities Education Act (IDEA) of December 31, 2023, as well as state laws regarding disability recognition. Additional medical expenses related to your disability may be deductible. Things like medical conferences, adjustments or adjustments made to your home for comfort or safety, and other adaptations may qualify.
To qualify for your child with a disability, your child must have an Individualized Family Service Plan (IFSP) for children in early treatment, or an Individual Education Plan (IEP) for school-aged children, and a current Statement of Eligibility. You do not have to include documentation for these qualifiers, but you should keep a copy with your document. Applicable application forms can be found on your state’s Department of Revenue website.
Adoption
If you adopt a child in 2023, there areseveral tax considerations . The IRS says, “Adoption tax benefits include both a tax credit for qualified adoption expenses paid to adopt a qualified child and an income exclusion of employer-provided adoption assistance.” The maximum amount for 2023 is $15,950 per child. Adoption, court and attorney fees, travel expenses and other related expenses may be included in the tax credit. The loan is non-repayable; however, the excess may persist for five years.
These exceptions do not apply to cases where a person, such as a stepparent, adopts his or her spouse’s biological child. The rules for when you can apply for these loans depend on a variety of factors, including whether it was a domestic or international adoption and whether the child has “special needs.”
Care for children
In general, yes, you can deduct child/dependent care expenses . This requires the child care provider’s address if they attend a skilled child care center, an Employer Identification Number (EIN), and the amount you paid for the care. Kindergartens must give you a report at the end of the year. If providers are in their home, they must still provide something like a Social Security Number (SSN) and address for the charges to be eligible. Nanny care is included in the deductible, provided the family does it legally. Nannies are considered household employees, and to properly deduct these expenses, you must pay wages for them, and then their wages will be deducted as a dependent care credit. If you pay under the table, you cannot deduct expenses.
Child care, especially full-time care for children not yet in school, can cost more than $10,000 a year, but by 2023, $3,000 is the most you can get back for one child, and $6,000 dollars for two or more. It’s not nothing, but it’s not everything. Some employers provide employees with tax-free fringe benefits and reimburse them for some of their expenses. In this case, all of these numbers will be reported on Form W-2 and will be deducted from your eligible credit.
Higher education
Parents who send their children to college are potentially eligible for tax breaks that can help offset education costs. There are several qualifying factors , including eligibility for a cost waiver and educational institution. If you or your spouse are pursuing higher education, you may also be eligible. A student who must file a tax return also cannot receive higher education benefits if their parents claim them as a dependent, so be sure to talk to your older children about how you file your taxes.
There are two types of loans. The Lifetime Earnings Credit is up to $2,000. The income limits for this credit for 2023 are $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). The American Opportunity Tax Credit (AOTC) applies to the first four years of higher education. The maximum annual credit per eligible student is $2,500. If the credit results in the amount of tax you owe being zero, you can get a refund of 40 percent of any remaining credit amount (up to $1,000). This year, the income limit for AOTC is $80,000 or less ($160,000 or less for married filing jointly), and you can receive a reduced credit amount if your MAGI is more than $80,000 but less than 90,000 US dollars (more than $160,000, but less than $180,000 for married filing jointly).