Consumers seek coupons for $25 deals on everything from massages to restaurants, but what about tax deals?
Parents who pay attention to their tax return can often recover thousands of dollars for everything from raising children to sending them to day care or college. Yet taxpayers leave billions of unclaimed credits on the table, according to federal figures.
Whether you do taxes on paper or online, watch for these potential deals. And take advantage of them because many could be reduced in a couple of years as short-term tax laws expire. Here are ways to save money:
Child tax credit. Parents can cut their tax bill by as much as $1,000 a child, up to a total of $3,000. Children must be under age 17, and there are income requirements to meet. The credit starts to phase out when married couples’ incomes top $110,000 and single parents’ exceed $75,000. But parents still might qualify for some limited credit with incomes up to $130,000 for couples and $95,000 if single, said William Massey, a tax analyst with Thomson Reuters.
Earned income credit. This credit is intended to help people who work but earn little. The amount of the credit is influenced by the number of children you have. For example, a couple with three children could have an income up to $48,362 and qualify, but a single person with no children would have to have an income under $13,460. The maximum credit with three children is $5,666, but if you are childless, it’s $457. To find out if you are eligible, use the table in IRS Publication 596.
Sending kids to college. The American Opportunity Tax Credit can take some of the sting out of paying college tuition and fees. You can get a credit of up to $2,500 per student per year for each of four years for college. To get the full benefit, income for a couple must be no more than $160,000; for singles, $80,000. But some credit is available for couples with income up to $180,000, or $90,000 for singles. The rules are covered in Publication 970.
Adopted child. Recent tax changes have enhanced the credits available to parents who adopt children, said Mark Luscombe, a tax analyst for CCH. Parents can receive a credit for up to $13,170 for expenses, such as legal fees, incurred while adopting a child. In some cases, travel costs may also be covered if the adoption was done away from home. Parents adopting special needs children may be able to get the full $13,170 credit even if they did not spend that much. Use Form 8839.
Child care expenses. If you pay someone to care for a child under age 13 while you work, you can get a credit for up to 35 percent of the costs up to $3,000 per child or $6,000 for two children. This can cover care in your home as long as it’s not provided by a spouse or one of your other children. See Publication 503.
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