Well, I know it’s not Monday, and that I’m a day late for Money Monday. . . but I was out having fun yesterday, and didn’t get this post proofed and published in time. So here goes, a day late, and a dollar short for the tax man, if you can implement any of these strategies to keep your hard-earned money by reducing your tax burden!**
Last installment of Money Monday, we talked about legit ways to lessen your taxes by itemizing your deductions. Today, here are some tips for using your children to full advantage as tax deductions!**
Just because your child works and gets a W-2 doesn’t mean that they have to claim themselves as a deduction when they file their taxes. You might consider continuing to claim them as a deduction on your taxes as long as possible. They can still get a nice tax refund, while you continue to claim them as a deduction, (certain rules apply). Ask your tax preparer about the the tax advantage of claiming your children as a deduction as long as possible.
Since they are benefiting from the bedroom you provide them rent-free, use of your utility room for their piles of weekend laundry, and the occasional raiding of the pantry, you can probably convince your college student that letting Dear Old Dad claim him as a dependent evens out in the end. If she still needs convincing, throw in a kick-back in the form of paying for some of her educational expenses, and then you might even qualify for the American Opportunity Credit or other itemized deductions for education, which might reduce your taxes, too!
The year your child turns eighteen, unless he is a full-time student for at least five months during the tax year, you may lose him as a dependent. If you homeschool, and won’t be sending your child straight to full-time college, you might consider not graduating them at eighteen, but continuing their home education and training. . . as long as it takes to fully educate them, or until they leave your home or turn twenty-four — whichever comes first! Ask your tax preparer to research the tax code on this one!
And, of course, the very best way to save on taxes is to have more children, thus increasing your dependent exemptions! For every dependent exemption, you could deduct $3650 on your 2010 tax return! If you are the type of family who recognizes the immediate blessings and long term satisfaction and joyful benefits of adding children to your family, then you can probably see that the tax benefit (added to the blessing of a new baby in your home) will far outweigh the additional financial expense of adding another mouth to feed! Just be sure to plan it so that they are born before December 31st if you can! January babies can’t help but be a bit of an ARGHHHH come April 15th!*
Next time, a look at the Snoopy Lifestyle!
*Babies born before December 31st, can be taken as an exemption for the entire tax year of the year in which they were born. So, a December 31st baby born in 2010 gives you an additional $3650 deduction on the 2010 taxes, whereas a baby born on January 1st gives you nothing but love until the next year!
**Oh, and I’m not an accountant, and don’t give tax advice, so be sure to check with your accountant and your tax preparer for the accuracy of the ever-changing tax laws; www. IRS.gov has helpful info, too.
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