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I remember seeing those cute little onesies around the time my daughter was born: Tax Write-Off. And yes, your kid is one -- for a while. But what about your disabled mother who doesn't live with you? Should your child file her own tax return? What about that 529 plan? I can hear you screaming and rending your clothes from here, you know.
Disclaimer: I know just enough about taxes to be really dangerous, so please don't take anything I'm listing here as tax advice you should follow or not follow. This post is all about increasing awareness. I am not a tax professional.
Now, can we deduct Grandma?
- If you have teenaged kids with part-time jobs, check and see if they should file. From CNN:
Some of the eligible people may have skipped filing because they earned too little to require it, even though they had taxes withheld from their wages or made quarterly estimated payments, according to the IRS.
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Figure out if it makes more sense to take the child and dependent care credit or use pre-tax dependent care accounts (if your employer offers them) to exclude that money from your income. Here's the thing: the ceiling is pretty low for a dual-income family. That means the more you make, the less credit you're going to get. And, it's not a refundable credit, which means you have to owe money to get the credit. The IRS won't tack it onto your refund. From Tax Policy Center.org:
On paper, the CDCTC appears larger than it actually is. Most taxpayers eligible for the higher rates have insufficient tax liability to benefit from the credit. Figure 2 shows the benefit taxpayers actually receive compared to what the law suggests they could receive.
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If you have a nanny (not daycare, not an occasional babysitter, but a nanny), you should know by now you have to withhold taxes on his or her behalf and also pay tax as an employer. YOU SHOULD KNOW THIS BY NOW. If you don't do it, not only are you screwing the system, you're screwing your nanny. And your karma.
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Beware your children using college money for beer. Lynn O'Shaughnessy writes at The College Solution:
The tax-free 529 promise isn’t guaranteed. If you withdraw more from a college 529 plan than a student’s college expenses, you will owe income taxes on the surplus cash and a 10% withdrawal penalty.
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Did you know you lose the child tax credit when your baby turns 17? Yup, that little deduction needs to be 16 or younger by the end of 2009 to get that deduction on your taxes.
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If you pay more than half the cost of nursing care for your parent or your spouse's parent, that person might qualify as your dependent. There are a zillion ridiculous caveats, but it's worth looking into if you are paying your parents' living expenses, even if they don't physically live with you.
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There's a new education credit this year -- The American Opportunity Credit. The headline here is that the income limits are higher and more expenses are covered -- you can use it to pay for things like textbooks, not just tuition and fees. Here are some details from The Kansas City Star:
More people qualify. Income limits are higher. Single filers with adjusted gross income of up to $80,000 are eligible for the full credit, with partial credit available up to $90,000.
Married taxpayers filing jointly with adjusted gross income of up to $160,000 can receive the full credit, with partial credit phasing out above $180,000.
Fun, eh? Have you filed your taxes yet? Are you one of those crazy people who actually likes doing her taxes?
Rita Arens writes at Surrender Dorothy and BlogHer and is the editor of Sleep is for the Weak. She is BlogHer's assignment and syndication editor.
