Children are expensive. From conception to diapers to day camp, all the expenses associated with little ones quickly add up. But if you’re expecting, you should know about the tax strategies that will save you some hard-earned cash over the growing-up years of your new baby. AICPA recently reminded readers about several tax deductions and strategies available to parents.
- Infertility Treatments — Nearly 10% of U.S. couples face infertility problems. And infertility treatments aren’t cheap. Medical assistance for infertility is covered under many insurance plans, so you should check your coverage to see if you can take advantage of it. You can also set up a medical expense flexible spending account (FSA) with your employer, and any money you put into the account from your paycheck won’t be subject to payroll taxes. Further, if fertility treatments exceed 10% of your household annual gross adjusted income, you can deduct them from Schedule A.
- Dependency Exemption — You can claim a dependent exemption for each child. 2014’s deduction amount was $3,950 per exemption.
- Child Tax Credit for Qualifying Individuals and Couples — If you file a joint return with a combined income of less than $110,000 or if your individual income is less than $75,000, you may qualify for a credit of up to $1,000 per child.
- Filing Status — If you’re a single parent, you may be able to claim head-of-household status rather than single status, which will offer you tax savings.
- Adoption Credit — If you plan to adopt, you should look into the adoption credit, which will help offset up to $13,190 (in 2014) in adoption costs.
- Daycare and Day Camp — If you have a child under age 13 you can use the child and dependent care tax credit. This credit is worth up to 35% of qualifying expenses of $3,000 for one child, or up to $6,000 for two or more children.
- Breast Feeding Supplies — Keep in mind that breast pumps are covered by most insurance plans. If your insurance plan doesn’t cover a pump, you can deduct the cost of the pump if your total out-of-pocket medical costs for the year exceed 10% of your household annual adjusted gross income. In this case, you can also deduct related supplies like nursing pads, lanolin cream, storage bottles, etc. Just be sure to save your receipts for documentation.
These tax strategies will significantly reduce the expenses related to having a child, so you’ll want to be sure to use them. If you have questions about what you qualify for, feel free to give me a call at 864.836.3136 and we’ll schedule a time to talk.