To be clear, children are costly in the best way possible.
Once the dust settles from changing diapers, sweeping floors, slapping bandaids on booboos, driving to sports practice, attending back-to-school meetings, saving for college, and buying countless goldfish crackers … you realize children are a lot of work.
They’re also monetarily costly. Depending on your income, you could be spending over $300K on each child, not including college.
But they’re worth it.
How are they worth it? Because they are your children, and in many ways they are the closest expression of eternal legacy that we can find on this side of our mortal coil.
Now, without a doubt, it takes money to raise a child. Amidst the aforementioned tasks, there’s gas money, sign-up fees, insurance premiums, and maybe most of all: grocery costs.
But there are a few crucial tax breaks I hope you’re aware of — a couple of these might serve as a refresher, and a couple might be new to you.
Regardless, the government apparently wants to help you chip away at child costs (at least for now). But first you need to know which tax levers to pull.
Making Children Less Costly For Colorado Springs Families With Kids Through The Child Tax Credit
“Having a child is like getting a tattoo … on your face. You better be committed.” -Elizabeth Gilbert
Because raising children truly does “take a village”, know that I’d love to help walk you through some of these steps in greater detail. Everybody’s childcare costs look different, and together we can plan for child-based tax breaks. Don’t hesitate to give me a call today. (719) 260-0320
Child Tax Credit (CTC)
Over the last few months, we’ve spent some time discussing the Tax Cuts and Jobs Act (TCJA), and although some of its outcomes have altered Colorado Springs taxpayers’ refunds in a negative way, there are indeed some perks. In this case, the signed law meant a CTC increase from $1,000 to $2,000.
Not bad, huh?
Just a few rules apply for the parent’s eligibility:
- Child less than 17 years old at the end of the tax year.
- You, as the taxpayer, claim the child as a dependent.
- Child lives with you, as the taxpayer, for at least six months of the year.
In addition, the dependent’s family must earn at least $2,500 a year.
The CTC is something you should definitely take advantage of if you have children.
Child and Dependent Care Credit (CDCC)
Do you, or someone you know, pay for childcare? This is arguably the largest amount of money Colorado Springs parents will spend on their children (once education is said and done).
The CDCC is crucial in giving you a break from childcare costs. In fact, the break will cover up to $3,000 in childcare costs for one child; $6,000 for two or more children.
Such a tax break might be crucial if you’re a single parent. In that case, filing as Head of Household (HoH) is imperative. This law applies to parents who are not married while raising children on their own.
The HoH offers a larger standard deduction than a single filing status. You would also receive more favorable tax brackets and applicable tax rates. If, during the tax year, you pay more than half the costs of keeping a home for yourself and a dependent, you will qualify as HoH.
If you’ve adopted a child, or know someone who has, it’s important to note there are specific tax breaks you can claim.
In 2019, it’s possible to claim a tax credit up to $14,080 in an effort to cover adoption costs (which, if you don’t know, get expensive quick). Side note: Employers can offer a similar tax break if one of their employees chooses to adopt.
Having children, biologically or through adoption, is one of the greatest gifts a human will experience. But, like we stated before, it’s important to lean on others for help. In this case, it just so happens to be the government.
According to a 2016 report from the United States Department of Agriculture, raising a child, from birth to age 18, averages out to around $233,610. That’s around $14,000 a year … sheesh.
If you need some help purchasing all those goldfish crackers, you might need to pick up a side hustle. But as far as your taxes go? It’s vital to have a proven strategy.
Call me today and let’s get one in place. Right after you go clean that stain up off the couch. 🙂
Wilklow & Associates, CPA PC