The benefits of having children include the tax savings they bring. A child can reduce the income you pay tax on by a whopping $3,400. But to claim your child as an exemption, a few requirements must be met:

• Relationship – They must be your biological child or grandchild.  
• Age – The child must be under the age of 19. Or, if they’re in school full-time, under the age of 24.
• Residency – The child must live with you for more than half of the year.

If your child doesn’t meet all of these requirements but you still provide for the child, other tax benefits could apply.

Child Tax Credit
You may be able to reduce the amount of tax owed by $1,000 if your child is an exemption and under the age of 17. And, if the credit eliminates any balance due, you may be due a refund of the remaining credit amount.

Adoption Credit
Did you adopt a child in 2007? A credit of up to $11,390 may be claimed for the associated costs. If you adopted a special needs child, the amount may be claimed regardless of the actual fees.

Keep in mind, if your 2007 tax due is less than the adoption credit, you can’t get the balance as a refund. But, you can carry the remaining amount forward to your 2008 return.

Child Care Credit
Are you paying someone to care for your child while you work or go to school? A credit of 20 percent to 35 percent of the amount paid – up to $3,000 for one child or $6,000 for two or more kids – may be claimed against your tax.

If you have a flexible spending account or cafeteria plan at work, check to see if you come out ahead using that instead of the Child Care Credit.

Earned Income Credit
This credit can put up to $4,716 back in your pocket, even if you don’t have to file a return or pay any tax. If you have one child and your income is less than $33,241, or if you have two children and your income is less than $37,783, you may qualify for the Earned Income Credit.

You can even get some of the credit before tax time by asking your employer to include part of the eligible amount in your paychecks.

For more information about smart tax filing, contact your tax and financial professional.

For more information please call our main office in Cumming at 770-887-1650.