Replacing Tax Breaks for Your Growing Children

Your kids are getting older. Before you know it they'll be dating, driving and entering college (if they aren't already!). Tax breaks drop dramatically as your children grow up, but you may be able to offset the losses with some timely tax planning. Consider the following tax events based on the age of your child:

• Age 13: No more dependent day care credit. The maximum annual credit for the cost of caring for your children while you and your spouse work, is generally $600 for one child and $1,200 for two or more children. But the credit is only available for children under age 13.

Tax move: Now that your child is a teenager, hire him or her to work at your business. Typically, the child will owe little or no income tax on the wages, and might even be able to claim an exemption from withholding.

• Age 17: Child Tax Credit (CTC) no longer available. With the CTC you receive a $2,000 credit ($1,400 of which is refundable) for each child. Unfortunately, the credit disappears when the child reaches age 17. Remember, a tax credit is a dollar-for-dollar reduction of your taxes due, so as each child reaches 17, your taxes will go up by the full amount of the previously claimed credit.

Tax move: Claim a nonrefundable $500 credit for a dependent who isn't a qualifying child for the CTC. Typically, this is available to parents of high school seniors and college students.

• Age 19 or 24: Goodbye qualifying child. At this age, your child is no longer eligible for the $500 dependent credit as a qualifying child, unless they are a full-time student. In that case, they stay eligible for another four years (until age 24). Once they cease to be a qualifying child, they may still be eligible for the credit as a qualified relative, but more restrictions (such as earned income) are in place.

Tax move: If your child is going to college, claim one of the higher education credits for qualified college expenses. For instance, the maximum American Opportunity Tax Credit (AOTC) is $2,500 per student per year, although it is subject to a phaseout. Once they are out of school, call to discuss your situation. We can run through the dependency tests to determine if you can still take the $500 dependent credit.
 
Give us a call to set-up an appointment to go over your tax situation and to plan ahead.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.   
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720
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