(Tax) Breaking News: Getting The Breaks You Deserve

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By Mia Bolaris-Foget

With winter holidays finally over, the next major winter event is filing one’s taxes. And, while none of us is exempt, there are certain exemptions certain individuals; primarily parents can take advantage of.

1. Depending On The Dependent Exemption: While most of us fear working all year just to payoff Uncle Sam, experts remind us, that our very affluent uncle give us a $3,200 per person exemption in 2005 to cover your cost of living. Singles are entitled to the exemption for themselves, and couples can claim the exemption for each other.

Expanding your family with the addition of a child entitles you (the couple) to an extra deduction (or exemption, commonly known as the dependent exemption). And, what that means financially for you is an extra tax deduction of over $3,000 annually until your child reaches 19 years of age.

However, as far as the actual tax savings is concerned, the amount you save depends on your tax bracket. The higher your tax bracket, the greater your savings, unless, that is, you earn too much to even claim the exemption.

In 2004, married couples with an adjusted gross income of more than $336,550 could not file for the dependent exemption, and they would also lose part of that (same) exemption if their adjusted gross income was more than $214,050.

However, if your adjusted gross income is less than either of the above amounts and you qualify for the deduction, making the claim is relatively simple. Simply fill out line 6C of your 1040 form or 1040A, making sure to include your Social Security number or Adoption Taxpayer Identification Number for your child in column 2. And, be sure you also fill out line 41 of your 1040 or line 26 of your 1040A.

2. Getting Credit Where Credit Is Due Via The Child Tax Credit: Should your income total less than the set limit of $130,000 for married couples filing jointly (for 2004), you’re entitled to the child tax credit. This credit reduces your tax bills by $1,000 per child; and because it is a credit rather than a deduction, it means $1,000 in your pocket for every offspring.

To correctly calculate the amount of the child tax credit you’re entitled to, fill out the child tax credit worksheet included in IRS Publication 972, Child Tax Credit (which can be easily downloaded for free from the IRS Web site), and then note the amount of your child’s tax credit on line 51 of your 1040 or on line 33 of Form 1040A. You should also complete line 6C of your 1040 or 1040A and, again, include your Social Security or Adoption taxpayer Identification Number for each child. Finally, check off the box in column 4 of line 6C for each child that you’re claiming for this credit.

Long Island Money & Careers Articles > (Tax) Breaking News: Getting The Breaks You Deserve