Generally, people don’t think about their Individual Tax Returns very often. After tax season is over and returns have been completed, most people put it out of their minds. However, taxes should not be looked at as a standalone topic. Taxes equal your hard-earned money. If you are unaware of certain deductions or changing tax laws, you could be doing yourself a disservice. In the long-run, this can cost you money. Here are 3 things you need to know about your personal taxes that you may not be aware of.
You May be Missing out on the Earned Income Tax Credit
According to the IRS, this is one of the most often missed credits. In other words, this means that people who qualify for this credit are not claiming it. As of 2017, the Earned Income Tax Credit could be worth up to $6,242 (IRS). There are some eligibility requirements. For example, as of 2017, if you are married and filing jointly with two children, your adjusted gross income must be less than $50,198. There are some other requirements, and the IRS website has a tool for determining whether you qualify. You can also check if you meet the eligibility requirements with your qualified tax preparer.
Contributions to College Choice 529 Plans are not Tax Deductible
According to recent polls, most Americans are unaware that the contributions that they make towards their children’s College 529 Plan are not eligible for federal tax deductions. People may believe that the 529 plan works like a traditional IRA, and contribute as much as they can to save on taxes. Unfortunately, it does not work this way. This is not to say that you should not contribute to these plans. The account can grow tax-free, and your child does not have to pay taxes if they use the money towards a qualifying educational institution. However, before parents add money to the account, they need to be aware that they will not be able to deduct this on their federal tax returns.
Day Camp Costs May be Applicable Towards Your Child Care Credit
Many parents are aware that there is a $3,000-6,000 tax credit for the care of their children while they are at work. What people may not know, however, is that summer day camp costs could apply, as well. Some stipulations are that the camp is during the parents’ working hours, and that it is the primary source of care for the day. Usually, overnight camps, where the children are sent away for a week at a time, do not apply. As of 2017, the Child Care Credit is only available for children under the age of 13. Parents that want to give their children a unique summer experience at camp should look into whether or not they can use this credit for those costs when filing their taxes.
Tax laws are always changing. Knowing what you can claim on your personal returns is essential. You can make better choices throughout the year and keep appropriate records, where necessary. If you have questions about your individual tax returns, please do not hesitate to contact us. We will work with you to maximize your tax savings.