Congratulations! You have just been handed your first little bundle of joy in the hospital and have embarked on the long journey of parenthood. It is a trip full of joyful experiences that make the corresponding aggravations worthwhile, and it comes with many benefits — some of which are tax-related. You can look forward to taking advantage of these child-related deductions and benefits.
Take special care to investigate the tax credits, because they are more valuable than deductions. Tax credits are subtracted directly from the taxes that you owe, while deductions only reduce your taxable income, and therefore reduce your tax bill by the percentage of your tax rate. Confirms Bronnenkant, "Credits are, in general, more valuable than deductions, because they reduce your taxes dollar for dollar." For example, a $1,000 deduction lowers your taxes by $100 if you are in the 10% tax bracket, while a $1,000 tax credit lowers your taxes by the full $1,000.
Who knew that your new addition to the family could bring you all these tax benefits? Don't forget about them come tax time — but in the meantime, simply get used to your new lifestyle and take the time to enjoy your new bundle of joy. Before you know it, he or she will be asking for the car keys and then your insurance will go up!
Failing to pay your taxes or a penalty you owe could negatively impact your credit score. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
Originally Posted at: https://www.moneytips.com/top-9-tax-benefits-of-parenthood
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