Asset or Liability?Your Child and Tax Time
Your children probably represent the biggest investment you'll ever make.
Forget houses, real estate, fine art or prospective gold mines. None of those can compare to the long-term costs of properly feeding, clothing, educating, entertaining and providing for the health and well being of a child. That's a given. And they're obviously worth it, regardless of the 'return' on your investment. That, of course, is intangible, and is best determined, and appreciated, by each individual parent.
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But the financial burden associated with bringing a new life into the world and nurturing that life for 18 years or more is entirely tangible. Fortunately, our government recognizes this enormous drain on parental resources, to the extent that they're willing to cut you some slack on your taxes. Think of it as a society's way of saying 'thanks' for ensuring the survival of the species (and, hopefully, for producing productive contributors to society). '
The Child Tax Credit for 2000 Returns
The good news is that each child in your family is worth 0 off your final tax bill, given (of course) certain restrictions. First, each child must have been 17 or younger as of 12/31/00. You must be able to claim each qualifying child (whether he is a foster child, stepchild or descendent) as a dependent on your tax return. You must also have a social security number for each dependent you intend to claim. And you must file either form 1040 or 1040A. (Sorry, you will not be able to claim the credit if you file 1040EZ).
The bad news is that certain higher income couples will receive reduced credits, or no credit at all. Specifically; the total Child Tax Credit for married couples filing jointly is reduced by for each ,000 that Modified Adjusted Gross Income exceeds 0,000. For singles, heads of households, or widow(ers) the cut-off is ,000. For those who are married, but filing separately, the cut-off is ,000.
To figure the credit that applies to your family, follow the instructions and use the worksheet in form 1040 or 1040A. For additional information, you may view IRS Publication 17 ('Your Federal Income Tax, Child Tax Credit, Claiming the Credit'), or visit the IRS's Website at www.irs.ustreas.gov.
For those with three or more qualifying children, additional credits may apply. The amount will depend on the Social Security and self-employment taxes (if any) that you've paid, and any Earned Income Tax Credit you may receive. For more information, see IRS Form 8812. It's interesting to note, especially for low-income taxpayers, that the additional child tax credit may provide a refund even if you don't owe any tax.
Daddy/Baby Bonding
Dale Kiefer is a free-lance writer living in northern New Jersey with his wife and two young sons. Born in New Jersey some 40 years ago, Dale was raised in Kentucky, where he spent most of his life, graduating from the University of Kentucky with a degree in Biological Sciences. You can see more of Dale's articles at his Suite 101 page devoted to expectant fathers
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