Having a child is an exciting time in a parent’s life, from birth right up until – tax time? That’s right, children can save you money when filing your federal income tax return.
If you’re the parent of a new child, you’ll be happy to know that it doesn’t matter what day throughout the year your baby was born, as even if his or her birthdate is December 31st, the IRS considers the child to have existed for the entire tax year. You’ll be eligible to receive the full amount of the tax credits, and there’s no reason to prorate any of the following tax breaks.
Every taxpayer is entitled to a personal exemption – $4,000 in 2015 – which is deducted directly from your taxable income, lowering the amount of your taxes. You’re also entitled to one for every dependent you claim.
Child Tax Credit
Each eligible child you claim as a dependent can net you up to $1,000 through the child tax credit. The credit is refundable, which means even if you don’t owe any taxes, you can get a refund from this credit. However, certain income limitations apply based on your filing status as follows:
- Single – AGI less than $75,000
- Married, filing Jointly – AGI less than $110,000
- Married, filing Separately – AGI less than $55,000
Also, the child must meet these requirements in order to qualify:
- Is under 17 at the end of the tax year
- Is claimed as your dependent on your return
- Didn’t provide over 50% of their own support during the year
This credit is available to parents who have an adjusted gross income that exceeds the limitations for the Child Tax Credit. If you don’t qualify to receive the full amount allotted in the Child Tax Credit, you may claim the Additional Child Tax Credit. And like the first, this credit is also refundable.