This article, by our own Jeff Kendall, CFP®, was published in the July 2014 issue of Multiplicity Magazine. You can view the entire issue here.
Having a child, and especially multiples, is expensive! So are taxes!
So how can we, as parents of multiples, save more on the latter in order to spend more on the former…or even on ourselves?
The good news is that this can be done, with just a little bit of extra work!
As a CERTIFIED FINANCIAL PLANNER®, tax payer and a parent of twins plus a third, I understand the value of saving on taxes to use that money elsewhere. I work with my clients, not just to help plan for the future, but also by finding places to possibly save money, and use that savings to help fund their goals. So, I enlisted the help of my personal tax advisor in order to pass along some quick tips to other parents that could potentially save you thousands in taxes every year.
We all get our W-2 and 1099 statements, but there are other forms, receipts and stuff (yes, that’s a technical term) that you need for you, or your tax advisor, to complete your taxes. Some of that “stuff” may include:
- Real estate tax statements.
- A summary of health care and child care costs.
- Receipts to back up outgrown clothes or toys you donated to charity.
- Any tax ID numbers for your childcare provider.
Nothing is Too Big
Did you make sure to take the deduction for the newborn? Of course you did! But does your tax preparer know about the newborn? Just because your tax preparer actually prepares your taxes, it doesn’t mean they know everything about your life. In the interview process mention everything! If you think they already know, confirm it with them.
This also includes “life changes.” Anything major, or even semi-major, may turn out to be a tax deduction, right up until Baby New Year comes on midnight of December 31st. Some of these things may be, but of course not limited to:
- Having or adopting a baby (we mentioned that one.)
- Starting or losing a job.
- Getting married, separated or divorced.
- Putting a child in daycare, summer camp or college.
All these little things do add up.
…Or Too Small
Everybody always remembers the big things, but how can any of these relate to taxes? Well, you do pay your tax advisor good money (which is may also be tax deductible) to help you along, but make it easier for them and bring up anything you think may be tax deductible. Here are two:
- Child Tax Credit – every parent who has a dependent child under age 17 by the end of December 31 can claim the child tax credit of $1,000 per child as long as their income is less than $75,000 ($110,000 if married filing jointly), with income phaseouts above those amounts.1
- Child and Dependent Care Credit – if you’re a working parent who relies on childcare, this credit can help with the expense if the child is under 13; it works out to be the lesser of $3,000 ($6,000 if more than one child) or the actual cost paid, with a maximum credit of $1,050 for one child and $2,100 for more than one child. This deduction can day camps and even specialized summer camps.2
Finally, here are a few more that everyone remembers, but just as just a friendly reminder…
- Adoption Credit3
- Charitable Contributions4
- State Tax Deductions on 529 Plans – this one does depend on the state you live, so make sure to ask you financial planner or tax advisor if you qualify
- The American Opportunity Credit5
There’s Plenty of Time
Now is the best time to start preparing. We are only half-way through the year, so digging up the receipts from February won’t be so tough. And now you are prepared for the rest of the year.
Please remember to consult your tax advisor for your exact circumstances and see which deductions and credits you are able to take. Karp Financial Strategies is not a tax advisor but we are willing to work with your tax advisor to pursue your financial goals.
If you would like to speak with Jeff about helping you with saving strategies that can possibly help with funding your dreams, please contact him at 704-658-1929 or by email at firstname.lastname@example.org.
Jeffrey P Kendall, CFP® is Vice President of Karp Financial Strategies. Karp Financial Strategies specializes in helping clients to dream it, plan it, and then pursue it! The “it” is your financial and life goals. Visit us at http://www.karpfinancial.com or 704-658-1929. Securities and advisory services offered through LPL Financial, a Registered Investment Advisor, member FINRA/SIPC.