Kate from Iowa, CPA 

CPA Mom Kate talks about Day Care and Child Credits:

 
Being the mother of five children, I am very familiar with the tax benefits of children.  There are many types of savings help you go that extra mile in keeping the smile on your face.

Here is a list of the available options.

(a) Dependency Exemption
(b) Child Tax Credit
(c) Child and Dependent Care Credit
 

Dependency Exemption: reduces your taxable income, but

* The child (dependent) must be living at your residence throughout the year or he/she must be a relative.

*The dependent's gross income must not exceed the annual exemption amount. This clause, however, does not apply to children who are less than 19 years of age or are full-time students whose age is less than 24 years.

* The taxpayer must support at least half the dependent's total cost of living.

* The dependent must be a resident of the US, Mexico or Canada.

If the children meets all the rules, you then provide your SSN and claim deductions.

(b) Tax Credits: this is the case of a new born kid. For instance, you are entitled to Child Tax Credit and Child and Dependent Care Credit. Tax Credits are the true savior because they measure the amount on per dollar basis. If a kid is adopted, the foster parents can claim a part of expense of legal adoption.

(c) Child and Dependent Care Credit:  A percentage of the Day Care expense is given as a tax credit.

The pages of this web site contain information that has been collected from many independent sources.   Each article or new item offers a different points of view and resources.   This information is for for general information only.  If you desire to ask a specific question, feel free to contact me.