Privileges Of Parenthood…The Top 10 Kiddie Tax Benefits

IRS Reminds Parents of Ten Tax Benefits 

Your kids can be helpful at tax time. That doesn’t mean they’ll sort your tax receipts or refill your coffee, but those charming children may help you qualify for some valuable tax benefits. Here are 10 things the IRS wants parents to consider when filing their taxes this year.

1. Dependents: In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.

2. Child Tax Credit: You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.

3. Child and Dependent Care Credit: You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.

4. Earned Income Tax Credit: The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.

5. Adoption Credit: You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.

6. Children with earned income: If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.

7. Children with investment income: Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.

8. Higher education credits: Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.

9. Student loan interest: You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.

10. Self-employed health insurance deduction: If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

This last one is a good tip to ask a Laughlin Associates business consultant about. As the leading incorporation services provider since 1972, we can help you as a small business owner to get the most out of your tax deductions. In fact, if you’re self-employed we can help you get as much 45% back on your taxes this time next year. Want to learn more? Call Laughlin Associates at 1-800-648-0966 or email lee@laughlinusa.com.

*Tips provided by IRS.gov

Cooking the Goose that Lays the Golden Eggs – Tax Hikes Hurt Business Owners

Today, the State of Oregon joined other high tax states in choosing to have their huge budget hole filled by the least number of people possible. Measures 66 & 67:

• Increase the minimum corporate tax by over 1000%
• Increase the state personal income tax by almost 20% for people making over $250,000 per year.

The TV ads made it clear to the masses that “If your family makes less than $250,000 per year, you will pay nothing!”  Translation? Let the business owners pay the bill.

It will come as no surprise to you that the city of Portland and the state of Oregon are struggling to attract and keep new businesses. Rather, long time businesses are scrambling to leave Oregon and are moving to neighboring states like Nevada

• Where taxes are low and…
• Legislation is geared to encourage the formation of companies and to protect their management teams.

I have an unusually good seat from which to watch all of this unfold as I live in Oregon and work in Nevada. At my company we have seen this exodus for years as California companies move over the boarder to set up shop in the Reno area.

My son Adam, who was sitting in a college business class this morning when he heard the news about passage of the tax hike, texted me and asked, “What does this mean for us?”  I think he asks a good question. As business owners, we need to do our part to help our communities. The trouble is that too many politicians have never run a business or had to make a payroll. They make decisions that attempt to fix an immediate problem, but end up hurting everyone in the long term. They cook the goose that lays the golden eggs.

We all know that in the end it will not be the “wealthy” that will pay for this tax increase. The rank and file employees will take the hit.  Jobs will evaporate and employers will have to cut back, close up or move on.

“What does this mean for us?” I would like to hear your answers to that one.