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Got Kids? They may have an impact on your tax situation

Listed are 10 things to consider if you have children.

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  1. Dependents In most cases, a child can be claimed as a dependent in the year they were born.
  2. Child Tax Credit You may be able to take this credit on your tax return 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. The Additional Child Tax Credit is a refundable credit and may give you a refund even if you do not owe any tax.
  3. Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work.
  4. Earned Income Tax Credit The EITC is a 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.
  5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child.
  6. Children with Earned Income If your child has income earned from working they may be required to file a tax return.
  7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate.
  8. Coverdell Education Savings Account This savings account is used to pay qualified educational expenses at an eligible educational institution. Contributions are not deductible, however, qualified distributions generally are tax-free.
  9. Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income.
  10. Student Loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions.

 
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