Kansas City, MO–(HISPANIC PR WIRE)–March 19, 2007–Tax issues are most likely the last thing new parents are thinking about but it is imperative for them to become informed of the different tax benefits that they may be eligible for, thanks to the new member in the family.
“It is important that new parents learn about what credits and exemptions they could receive, as these can make a difference in their returns, especially if they are expecting a tax refund,” said H&R Block tax professional Javier Moreno. “The refund money that new parents receive can offer them the opportunity to open up a pre-paid college fund, or other savings account for their little one.”
These are the three tax credits that new parents may qualify for:
1. Child Tax Credit: Available regardless of filing status, parents may be able to get as much as $1,000 per child with this credit. Generally, it can’t reduce their tax below zero but it may be refundable up to the total amount of the credit allowed if their taxable earned income exceeds $11,300. However, this credit is reduced if their modified adjusted income is $110,000 or above if married filing jointly, $75,000 if single, head of household, or qualifying widow(er) or $55,000-if married filing separately.
2. Child Care Credit: Parents may also be entitled to a credit for what they paid someone to look after their baby while they worked or looked for work during 2006. The credit is a percentage based on their adjusted gross income and can range from 20 percent to 35 percent of their qualifying expenses (up to $3,000 per child with a maximum of two), depending on income level.
To be eligible, a taxpayer (and his or her spouse, if married) must maintain a home where he or she lives in with the baby. Generally, the parent (and her or his spouse, if they are filing jointly) must have some type of earned income during the year, such as wages or self-employment income. If filing jointly, a taxpayer may still qualify for the credit if one spouse is disabled or is a full-time student.
3. Earned Income Tax Credit (EITC): It is a refundable credit available to lower-income workers. The amount of the credit varies with the income level and the number of qualifying children that a taxpayer has. They may qualify if they have one qualifying child and their earned income is less than $32,001 for single filers (or $34,001 if married filing jointly), or if they have two qualifying children and their earned income is less than $36,348 (or $38,348 if married filing jointly in 2006).
Aside from these important credits, other things to take into consideration include:
— Does the new baby need a Social Security Card? It may seem silly to apply for a social security card for a baby, but it’s actually important to do so as soon as possible after the child’s birth. The social security number is key to getting some of the tax breaks to which new parents are entitled to. If nothing else, not having it may cause unnecessary delays in the processing of their tax returns. To apply for a social security number, file Form SS-5 with the Social Security Administration.
— Will there be changes to the filing status? The filing status for new parents who are married and live with their spouses does not change. However, those who are unmarried (generally, a taxpayer’s marital status on the last day of the year determines his or her status for the entire year) may be able to file as “head of household” and qualify for a higher exemption amount than a single filing status. To qualify:
— A taxpayer must have paid more than half the cost of maintaining a home for him or herself and the child, and
— Generally, the child must have lived with that taxpayer for more than half the year, or, for the year of birth, he or she must have lived with the taxpayer more than half of the portion of the year he or she was alive.
To learn more about the full array of tax-related deductions and credits, visit http://www.hrblock.com
About H&R Block
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