You have already gone through what may have been the happiest, yet longest day of your life when your child came into the world. However, as the euphoria fades away, the reality starts to sink in. When it comes right down to it, being a parent can be quite expensive. Not only do kids require new furniture, food and healthcare, but they will also need more clothes and diapers that you can probably imagine right now.
Not to fear, though, the federal government has your back when it comes to the expenses related to your child care. This article will focus on the parent tax credit, which is really two different kinds of tax credits: the dependent exemption and the child tax credit.
As you probably know, the Internal Revenue Service allows each person that pays income tax to exempt a portion of their income that is not taxable. In 2016, this amount is $4,050 for you, and if you file as a married couple, you get to double this amount (you each get to take one exemption, meaning a total exemption of $8,100). When your little bundle of joy comes into the world, the federal government allows you and your spouse to claim one more dependent exemption for each child you have. This exemption is allowed for each child that a couple has under the age of 19 (as long as the child is actually dependent upon you, as their parents). In addition, you may be able to claim a dependency exemption for a child over the age of 19 if the child is a full time student and meets a few other requirements.
You may be wondering, and with good cause, exactly how much you will be able to claim as the dependency exemption for your parent tax credit. This will depend upon how much money you and your spouse make in a year. For a married couple in 2016 that filed a joint tax return, they will receive $4,050 per dependent as long as their combined income is not more than $311,300. If the couple collectively makes more than this, the exemption will be reduced. The ceiling for earnings varies depending upon your filing status. If you are single and file alone, the ceiling is $259,400. Any earnings past this will reduce the amount of the dependency exemption.
Claiming a dependency tax exemption is pretty easy. All you have to do is complete line 6c of your 1040 or 1040A. You will need to provide a Social Security number or Adoption Taxpayer Identification Number for your child as well. Then just be sure to complete the rest of your tax return properly and fully.
In addition to the dependent exemption, you may also be able to claim a child tax credit as another parent tax credit. This tax credit is designed to help parents that have low incomes support their families, and is therefore only available to people that make less than a certain amount of money. As it currently stands, the base tax credit is $1,000 for each qualifying child (under the age of 17), but this amount is reduced if your reported income exceeds a certain amount. In 2016, the threshold income level for a joint return was $110,000, and the child tax credit was reduced by $50 for each $1,000 (or fraction thereof) that the reported income exceeded the threshold level.
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