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Saturday, February 12, 2011

Tax Breaks for Parents and Families Offset Living Cost in 2011

Raising children is expensive and tax breaks with credits for parents and families in 2011 attempt to offset the increased cost of living.

If you are a single or married parent, there are multiple tax breaks and benefits for people with children. Tax filers are pleased to find out Congress recently extended the $1,000 Child Tax Credit through December 31, 2012. It was scheduled to go back to just $500 per qualifying child, so this is good news.

The Earned Income Tax Credit (EITC) is for families that earned under $48,362 in 2010. Eligibility is based on the taxpayer's family size and total include. The EITC for some families can be worth up to $5,666. EITC is first used to pay any federal taxes still owed by an eligible worker than the remainder is issued as an IRS check.

There is also the Making Work Pay Credit for certain filers who are self-employed or who have a spouse who did not work or earn enough to have income tax withheld in 2010. The credit for a married couple is worth up to $800.

The Downey Patriot reported Rep. Lucille Roybal-Allard stated, “During these challenging economic times when so many families are struggling, I want to make sure all eligible taxpayers take advantage of these federal tax credits.”

Fox Business reminds single parents to consider their filing status. Being listed as single rather than head of household can cost taxpayers. Single parents with children away at college who pay more than half the child's support can still take head of household status because the child's absence is temporary. Also, tax credits are available for paying tuition and educational expenses. Tutoring may also be deductible for children with learning disabilities.

A divorced parent who suspects their ex will try to claim the children as dependents, should file their taxes first as the IRS will not get in the middle of the dispute. The first one to file gets the deduction and the party who files later will have to make a case for the refund. Divorced filers should also remember to track alimony payments as they are taxable for the recipient.

Parents who use a childcare provider may qualify for the Dependent Care Credit, which was raised to $3,000 from $2,400 for each child. Taxpayers should get a statement from the child care provider showing how much was paid with the provider's social security number or federal ID number and an address. Employer-provided child care facilities may be eligible for a tax credit.

Finally, qualified adoption expenses may be eligible for an adoption credit with a dollar limitation of $10,000 and the credit itself increased by another $1,000 for 2010 and 2011. It is also refundable, which is more welcome news.

April 18 is the tax filing deadline for 2011. Parents, single parents, divorced parents and families have an array of tax credits to help offset the rising cost of living and raising a family. Take advantage of these tax credits to put money in the bank or payoff outstanding bills.


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