Being a parent can be filled with stresses and many rewards, this year the IRS has rolled out or extended a number of tax credits to benefit families, below you will find new and extended tax credits for the 2010 tax year. Peruse them and as always ask your tax professional about these and other incentives you may qualify for. It’s your money never be afraid to ask questions.
Investment Income for Children:
- Investment Income Children with investment income may have part or all of this income taxed at their parents’ tax rate rather than at the child’s rate. Investment income includes interest, dividends, capital gains and other unearned income.
- Age Requirement The child’s tax must be figured using the parents’ rates if the child has investment income of more than $1,900 and meet one of three age requirements for 2009:
a. The child was born after January 1, 1992.
b. The child was born after January 1, 1991, and before January 2, 1992, and has earned income that does not exceed one-half of their own support for the year.
c. The child was born after January 1, 1986, and before January 2, 1991, and a full-time student with earned income that does not exceed one-half of the child’s support for the year.
- Form 8615 To figure the child’s tax using the parents’ rate for the child’s return, fill out Form 8615, Tax for Certain Children Who Have Investment Income of More Than $1,900, and attach it to the child’s federal income tax return.
- Form 8814 When certain conditions are met, a parent may be able to avoid having to file a tax return for the child by including the child’s income on the parent’s tax return. In this situation, the parent would file Form 8814, Parents’ Election To Report Child’s Interest and Dividends.
Education Savings Bond Interest Exclusion is phased out for Married Filing Joint or Qualified Widow(er) for those whose modified AGI is between $105,00 and $135,000
- No deduction is allowed over $135,000
- Married Filing Separately do not qualify for the exclusion
- Single Head of Household the interest exclusion is phased out for taxpayers who modified AGI is between $70,00 and $85,000 (over $85,000 no more deduction)
Standard Deduction Increased for 2010
- Head of Household $8,400
- Married Filing Jointly/Widow(er) $11,400
- Single or Married Filing Separately $5,700
Earned Income Credit Max Credit Increased
- $3,050 with one qualified child
- $5,036 with 2 qualifying children
- $5,666 with 3 qualifying children
- $457 with no child
Additional Child Tax Credit 2010
- Minimum amount of earned income needed to claim additional child tax credit is $3,000
Refundable Adoption Credit
- Part of the Affordable Health Care Act of 2010
- Qualified expenses up to $13,170 for both special and non-special needs adoption
- Phased out for taxpayers whose modified AGI >$182,520
These are just a number of benefits available to families for the 2010 tax year. If you have any questions feel free to contact us for more information and income tax preparation, contact Hickey&Hickey at (800)576-9574 or by e-mail firstname.lastname@example.org