New Parent? Here are Five Tax Benefits Children Bring to Your Life…Besides Diapers and Sleepless Nights.


Children are a blessing and a curse (and not the least bit cheap!). It is nice to know that the Internal Revenue Code at least acknowledges your pain and provides some tax benefits to make raising a child more affordable. Now if only the IRS could make it easier to raise a child…

Here are five tax benefits that are available to newly minted parents:

  1. Exemptions. You are now + 1 on your tax return (maybe more?!) and so you are allowed an additional exemption on your tax return. For 2016, the exemption amount for a dependent is $4,050 per child. You qualify for the full amount no matter when the child is born during the year, even if it is 11:59 on the 31st of December.
  2. Child Tax Credit. As a parent you now qualify for a $1,000 refundable credit, so long as your child is under 17 by the year-end. If your income tax liability is less than the credit than you may be able to receive the excess of the credit over the as a refund – meaning additional money in your check.
  3. Child and Dependent Care Credit. If you have to leave your child at daycare or pay someone to watch your child to enable you to work (or look for work) than you may qualify for this credit. The key requirement is that your job (or search for a job) requires you to leave your child at daycare; if your spouse doesn’t work or you are placing your child in daycare merely for convenience than you will not qualify. For 2016, the credit may be up to $1,050 for one child or $2,100 for two or more children depending on your income. The credit is not refundable and if you cannot use it in the current year than it is lost.
  4. Adoption Credit. First, let me say that adopting a child is a wonderful thing but painfully expensive. To help parents who want to adopt, the Internal Revenue Code provides a credit for adoption related expenses, up to $13,460 for 2016. This credit is not refundable but if you cannot use the credit in the current year then you can carry it forward up to five years. The rules for this credit can be complicated so if you are considering adopting a child than you should seriously consider speaking with a tax professional to see if you qualify.
  5. Earned Income Tax Credit. For low-income parents the Earned Income Tax Credit or EITC provides additional money to families in need through the use of a refundable credit. Like the child tax credit, if the EITC exceeds your tax liability then you will receive the excess in the form of a refund. The credit amount depends on how many qualifying children you have. The IRS provides a EITC Assistant to help you determine your eligibility, you can click here to open the link. I have listed the refund limits for 2016 here: $6,269 with three or more qualifying children; $5,572 with two qualifying children; $3,373 with one qualifying child; and $506 with no qualifying children.

Children may be taxing but at least you have the consolation of knowing that the little bundles of joy can save you some taxes. This list is not exhaustive of all the various tax benefits out there for children so if you have any questions about how your child impacts your tax situation, please give my office a call. Best of luck to you and yours and happy parenting!

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Tax Tips for Year-End Charitable Giving

Give and you shall receive, as the saying goes. If you are considering a year-end gift of money or property to a worthy charity, here are some tips on maximizing your charitable tax deduction:

  1. Keep good records! Regardless of the amount of money given, meaning from dollar $1 up, the taxpayer must maintain a record of the donation made at or near the time of the donation. You can meet this requirement with a bank statement, a cancelled check, a credit card statement or a statement from the charity. Regardless of the form of the record, such record needs to show the name of the charity, the date of the donation, and the amount of the donation.
  2. If you make a single donation, of money or property, and it is worth more than $250 then you must get a written acknowledgement from the charity to deduct this donation. The written acknowledgement needs to contain the name of organization; the amount of cash contribution, if applicable; a description of any non-cash contributions, if applicable; a statement that no quid pro quo goods or services were provided in return for the contribution or, if goods or services were provided, a description and good faith estimate of the value of goods or services provided to the donor.
  3. If you make a gift using a credit card before midnight on the 31st than it is deductible in 2016 even if you do not pay your credit card until 2017. Similarly, if you properly mail a check on the 31st than it will also count as deductible in 2016 even if the check clears in 2017.
  4. If you are 70 ½ or older and you hold an IRA account, you may be required to take what are called required minimum distributions from a traditional IRA account. You can make a donation, up to $100,000, directly from your IRA to an eligible charity tax free. While you will not get a tax deduction for the contribution, the distribution is not taxable to you and qualifies as a required minimum distribution.
  5. If you are going to make a gift of household goods or clothing than such items must be in good used or better condition to be deductible. Damaged or stained goods and clothing will not be acceptable and hence deductible. Household goods includes such things as furniture, furnishings, electronics, appliances and linens. Items worth over $500 do not have to meet this “good used or better condition” if a qualified appraisal is done.
  6. If you are making a gift of property with substantial worth than you may need to have an appraisal to provide a proper value to use for your charitable donation. There are some complicated rules in this area so I won’t go into detail but if you intend to donate artwork, antiques or collectibles than you may need to meet other requirements to get full advantage of your deduction.

I hope you and yours have a wonderful New Year’s Eve and best of wishes in 2017!