Here's a look at the laws that could wage a multipronged attack on your wallet and what you can do to prepare.
There's good news for military families who plan to have children or currently raising them. There are a number of tax benefits available to those who claim a dependent child on their income tax return. Here are a few tax tips for military families that may benefit from them if they file their tax return early next year.
Parents who have adopted a child are eligible to take advantage of a special adoption credit of up to $11,390 for qualified expenses such as adoption fees to the organization or group sponsoring the adoption, court costs, attorney fees, domestic and international travel costs (including meals and lodging while away from home) and other costs related to adopting a child. The full amount of the credit is allowed for the adoption of a child with special needs.
One of the most important credits available to families with children is the Child and Dependent Care Credit. This nonrefundable credit reduces the tax that is owed and is available for child care (if the child is under age 13) while you work or look for work. The Child and Dependent Care Credit offers up to $2,100 for multiple dependents and can also be used to care for a disabled dependent or spouse.
A Child Tax Credit is available to all taxpayers for each dependent child they claim that is under age 17. For the upcoming 2007 tax year returns, this credit will provide up to $1,000 for each child who was under the age of 17 in 2007. It is important to note that military parents who are stationed in a combat zone must include any non-taxable pay as part of their earned income calculations in order for the Child Tax Credit to apply.
Taxpayers with older children who work part-time jobs or who have investment income should remember that teens still qualify as dependents unless they provide more than one half of their own support. Under certain circumstances, parents can elect to report their child's investment income, such as interest from a savings account, on the parents' own return so that the child does not have to file a return. However, if your child has a part-time job, he or she will need to prepare and file an individual tax return in their own name.
Finally, for taxpayers who have outstanding student loans for their children in college, they can deduct any interest they accrue on these loans. In addition, there are two education credits available: the Hope Credit, which offers filers up to $1,650 for each eligible student for a period of two tax years; and, the Lifetime Learning Credit of up to $2,000 for any courses taken (such as courses to acquire or improve job skills) beyond the first two years, or courses taken in the first two years when you do not qualify for the Hope credit.
Raising a family may have its financial challenges, but knowing all of the tax benefits available to you for each stage of your family's growth can help ease the burden. For additional information on these and other tax benefits, please contact your local Jackson Hewitt Tax Service office. To locate the nearest office, log on to www.jacksonhewitt.com and click on the office locator feature or simply call 1-800-234-1040.
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