Money tips for new parents, tax breaks for parents[SIZE=-1]Tax Breaks for Parents A generation ago, parents used to joke about their kids being "little deductions," good for a few bucks off their taxes every April 15. These days, parents are entitled to all kinds of tax breaks for their children, if they know to claim them.If you use tax software to prepare your return, it should walk you through these tax breaks and make sure you receive them. A real live human accountant or other tax pro can do the same thing. Here's a quick overview:First there's the dependency exemption, good in 2007 for $3,400 off your taxable income for every child in the family who qualifies as a dependent. It starts to phase out when adjusted gross income (on a joint return) hits $234,600. The exemption is gone when income reaches $357,100.Then there's the child tax credit of $1,000 for every dependent child under the age of 17. Parents with three or more kids are entitled to an additional credit. A credit is even better than an exemption because it cuts your tax bill by that amount, rather than reducing the amount of your income that is subject to tax. Once more, there are income limits. In this case, couples filing jointly must have a modified adjusted gross income of $110,000 or less to qualify for the full credit.Yet another credit, called the child and dependent care credit, helps parents with kids under the age of 13 cover some child-care expenses. Parents can claim a credit equal to 20 percent or more of amounts up to $3,000 per child. So, for example, a couple claiming $3,000 for one child in child-care costs would be entitled to a credit of at least $600. Parents can also use a flexible spending plan at work, if your employer offers one, to have up to $5,000 in pretax earnings deducted from your pay to spend on dependent care. The plan then reimburses your expenses, up to whatever amount you contributed, throughout the year. For parents in the 25 percent tax bracket (for 2007, that is joint filers with taxable income between $63,700 and $128,500), for example, this break would be worth $1,250.There is also a one-time credit of up to $11,390 for qualified adoption expenses that's available to parents who adopt a child, called, as you might guess, the adoption credit. The credit begins to phase out when your modified adjusted gross income reaches $170,820.Finally, don't forget the charitable deduction you can receive when you donate your children's old clothes and toys in good condition to worthy organizations. Given how fast kids outgrow things, that's one deduction that you can count on year after year.[/SIZE] [SIZE=-1]Subscribe now![/SIZE]
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