Moms are busy. That goes without saying. Between chauffering kids to activities and likely working a full-time job, finding extra time for anything else is next to impossible.
But yet, it’s also necessary.
Many moms manage the entire household. That means everything from laundry and cooking to paying bills and overlooking the finances. But when it comes to a family’s money, taxes are sometimes overlooked. Yet, taxes are an important piece of any family’s complete financial picture. Filing a tax return can yield one of their biggest “paychecks” of the year, which comes in the form of a tax refund.
To help your family achieve the best tax outcome possible, here’s what you should know before you file your 2018 tax return.
1. Tax reform eliminated the personal exemption – but it gives back, too.
If you’re used to claiming a personal exemption for yourself, your spouse, and each of your children, you’ll have to adjust this year. The 2017 Tax Cuts and Jobs Act removed the value of a personal exemption from the tax code in 2018. Previously, that deduction reduced your family’s household taxable income by $4,050 per person.
However, the new tax law makes up for the loss of exemptions for most people in other ways. For instance, the Child Tax Credit expanded by going from $1,000 in value to $2,000. The standard deduction approximately doubled for each filing status as well. And for dependents too old to qualify for the Child Tax Credit, you can now claim a new nonrefundable credit of $500.
2. Don’t miss out on the credit for child care expenses.
If you need to pay someone to take care of your children while you work, the Child and Dependent Care Credit may help you defray up to 35 percent of those expenses. To qualify for the credit, however, you need to pay someone older than 19 years of age and who is not the child’s parent to care for the child. You also need to ask for the person or organization’s Social Security number or other taxpayer identification number as you’ll need that when you file your return. You can take the credit as long as your child is under age 13, or physically or mentally unable to care for themselves.
You may also qualify for the credit if you pay for childcare while you are a full-time student or while you look for work.
3. Know the rules for claiming dependents.
Just because the Internal Revenue Service (IRS) no longer allows taxpayers to claim personal exemptions doesn’t mean you can no longer claim dependents. If you share custody of a child, or if one parent has custody and the other parent financially supports the child, it’s still important that you know the rules for tax benefits, such as the Child Tax Credit, education tax benefits, and so on.
A child is your dependent if he or she:
- Is your child, stepchild, eligible foster child, brother, sister, step-brother, step-sister, or descendant of any of them
- Is younger than you and under age 19 (under age 24 if a full-time student), or totally and permanently disabled
- Lived with you more than half the year
- Did not provide more than half of his or her own support
- Does not file a joint return (unless it is only to get a refund)
- Is not a qualifying child of another taxpayer with higher priority under tie-breaker rules
Different rules apply for relatives, and even nonrelatives, who live with you and for whom you provide support.
For purposes of the Earned Income Tax Credit, the parent the child lives with can claim the child, regardless of who qualifies to claim the child as a dependent.
4. Use the right filing status.
Using the right tax filing status can save you a lot of money. For example, if you qualify to file as a Qualifying Widow(er) With Dependent Child after your spouse dies, your standard deduction for 2018 is $24,000 instead of $12,000 if you file as Single.
If you are unmarried on the last day of the year, and you maintain a home for your children, you may file as Head of Household. That filing status is also significantly more advantageous than filing as Single. The 2018 standard deduction for Head of Household is $18,000.
5. Have you adopted children? Check out the Adoption Tax Credit.
The Adoption Tax Credit is pretty amazing. It’s also a great help to those who are trying to expand their families and give a child a forever home. For every dollar you spend on adoption expenses in 2018, you may qualify for a dollar back through the adoption credit. You can qualify for up to $13,840 total.
6. Look for the Child Tax Credit or Non-Child Dependent Credit.
You don’t have to do anything special to claim the Child Tax Credit. If you use a tax software program to file your return, the program calculates your credit based on your qualifying children under age 17. You generally receive $2,000 per child, although the credit slowly decreases as your income passes the $200,000 mark.
If you have older children, or a dependent such as your parent living with you, you may qualify for the Non-Child Dependent Credit. That’s worth $500 per child for most taxpayers.
Source : TaxAct Blog