Those Cute Little Write-Offs: How Your Family Really Affects Your Taxes
I remember seeing those cute little onesies around the time my daughter was born: Tax Write-Off. And yes, your kid is one -- for a while. But what about your disabled mother who doesn't live with you? Should your child file her own tax return? What about that 529 plan? I can hear you screaming and rending your clothes from here, you know.
Disclaimer: I know just enough about taxes to be really dangerous, so please don't take anything I'm listing here as tax advice you should follow or not follow. This post is all about increasing awareness. I am not a tax professional.
Now, can we deduct Grandma?
- If you have teenaged kids with part-time jobs, check and see if they should file. From Kay Bell at Bankrate.com:
A youngster who is a dependent of another taxpayer generally doesn't have to file an income tax return unless the youth makes more than the standard deduction amount for a single filer. The 2013 tax year standard deduction for single taxpayers is $6,100. A dependent youth can earn up to that much and not have to file a tax return.
Figure out if it makes more sense to take the child and dependent care credit or use pre-tax dependent care accounts (if your employer offers them) to exclude that money from your income. Sometimes you can even do both. Since everyone's situation is different, click here for a calculator to help you figure out what to do.
If you have a nanny (not daycare, not an occasional babysitter, but a nanny), you should know by now you have to withhold taxes on his or her behalf and also pay tax as an employer. YOU SHOULD KNOW THIS BY NOW. If you don't do it, not only are you screwing the system, you're screwing your nanny. And your karma.
Beware your children using college money for beer. According to the SEC:
Withdrawal restrictions apply to both college savings plans and pre-paid tuition plans. With limited exceptions, you can only withdraw money that you invest in a 529 plan for eligible college expenses without incurring taxes and penalties. "
Did you know you lose the child tax credit when your baby turns 17? Yup, that little deduction needs to be 16 or younger by the end of 2013 to get that deduction on your taxes.
If you pay more than half the cost of nursing care for your parent or your spouse's parent, that person might qualify as your dependent. There are a zillion ridiculous caveats, but it's worth looking into if you are paying your parents' living expenses, even if they don't physically live with you. Here's a calculator to help you figure it out.
Fun, eh? Have you filed your taxes yet? Are you one of those crazy people who actually likes doing her taxes?