Published January 26, 2018|3 min read
Doing your taxes isn’t anyone’s idea of a good time, but it can be especially tough for people with kids. Just trying to find the peace and quiet needed to focus on the task can be a challenge with little ones running around. Then there’s the extra tax considerations that come with having a family.
To help, we highlight things you can do to make your taxes a little easier — and maybe even cheaper.
OK, not really, but if you’re a new parent, you won’t want to overlook the dependency exemption that will reduce your taxable income by $4,050. You’ll probably qualify for the child credit as well, which is worth up to $2,000 per qualifying child.
With each new child, it’s a good idea to update your W-4 with your employer that adds at least one extra withholding allowance so you can take home more of your paycheck.
The expenses you incur when adopting a child can get you a tax credit come filing season, so save your records.
It can really pay to compare the standard deduction you’ll get if you don’t itemize with the amount you could deduct if you itemized. Sometimes, the standard deduction is larger.
You can deduct student loan interest, contributions to health savings accounts (HSAs), IRAs and even job-related moving expenses, to name a few. Don’t let these things slip past.
If your employer offers a medical reimbursement or flex account, it can be beneficial for your taxes. They allow you to tuck away a portion of your salary you can use later to cover medical bills. You also avoid taxes on the money you put into the account, providing serious savings over paying your medical bills with your after-tax dollars. Bonus tip: Don’t forget to change your plan when you have a life event like a new baby, marriage or divorce.
Like a health reimbursement account, a child-care reimbursement account lets you use pre-tax dollars to pay the folks looking after your kids while you work. That can be a hefty savings when you’re filling out your tax forms.
Not only will saving for future college tuition bills help ensure you can pay for your child's education, but it can help you save on taxes, too. For example, the money earned in a state-sponsored 529 savings plan is completely tax free.
Yes, the IRS lets you contribute to your IRA through April 15 for the previous tax year, but you’ll get more out of your contributions by maxing out your contribution as early in the year as possible. The earlier the money hits your account, the sooner it starts earning tax-deferred interest. That can really add up over the years.
If you want to mitigate future taxes on your retirement savings, a Roth IRA can help you do just that. You won’t reduce your taxable income like you would through investments in your 401(k), but you won’t pay taxes when you take money out of the account during retirement.
Not waiting for the April deadline is an especially good idea if you’re getting a refund, but also because there are fraudsters out there who file tax returns in other people’s names in hopes of scoring a check from the IRS. You can lessen the headaches associated with tax fraud by filing your taxes early. The IRS starts accepting returns on Jan. 29 this year. Here are some other important dates for filing your taxes.
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