New parents are often equally overjoyed and overwhelmed when it comes to their first child, but unfortunately, the new child also brings new complications to their tax returns. The key is navigating the myriad of tax credits and deductions available to lower your tax liability.
Partner Jim Daniels said the first step is to establish what tax credits or deductions you are eligible for. Most of the time, it is dependent on your income level, with more generous tax credits available for lower-income taxpayers. For those earning an adjusted gross income of $43,000 or less, there is the dependent care tax credit that allows a deduction of up to $3,000 if childcare services were employed and paid for. "You can usually recreate the expense anyway if you paid using a credit card or a check," said Daniels.
And do not forget to make adjustments to your W-4 withholding with your employer to include the new dependent. This will likely lower the refund you get next year but it'll increase the size of your paychecks going forward since less money will be withheld, Daniels said.
Read the full article published by USA Today.
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