The birth of Jesus is one of the most well-known stories. For Christians, it is, as the saying goes, the reason for the season. But even many non-believers are moved by the tale of the birth of a child in stable, with a manger serving as his crib.
One of the most beautiful renditions of those humble circumstances is in What Child is This? It was a tough call, but that song barely beat out Away in a Manger for the final spot on the 2013 Christmas Tax Tip Tunes play list.
Both songs celebrate the birth of a child. And while Christians note that it was a special birth, it also was a momentous event for the infant Jesus' parents.
Although I am not a parent, whenever I hear the Christmas story, I can't help but think of Mary and Joseph. Not only did they have to cope with the spiritual implications of their child's birth, but also the many decidedly down-to-earth issues of being responsible for the life of another, small human.
And, of course, the tax geek in me naturally turned toward the many ways that today's Internal Revenue Code helps parents. Among the popular child-related tax breaks are:
- Exemption claim: A dependent youngster is another exemption for his taxpaying parents. This is a dollar amount — $3,900 for the 2013 tax year; $3,950 in 2014 — that is used to reduce the filing parents' adjusted gross income.
- Child tax credit: The child tax credit is $1,000 per qualifying child. This is particularly because, as a credit, it can help reduce a tax bill, possibly all the way down to zero. Some parents also are able to claim the additional child tax credit, which is refundable; this means it could net the taxpayer a refund if they don't owe Uncle Sam anything. The IRS has an online interactive tool to help families determine how much of a child and/or additional child tax credit they can claim.
- Adoption tax credit: This credit helps cover some of the costs if you add to your family via adoption.
- Child care costs: Working parents can get some help with their youngsters' care thanks to the child care tax credit. Some companies also offer their employees a child care flexible spending account to help cover some of these costs.
- Education tax breaks: With today's college costs, parents should start saving for their youngsters' higher education as soon as the kids are born. One tax-saving college cost vehicle is a 529 plan. Uncle Sam also offers a variety of other education tax breaks that can help offset the future cost of your child's matriculation.
As with all tax provisions, there are eligibility requirements. And while the Internal Revenue Service tried years ago to come up with a uniform definition of a child, it couldn't. So what makes a child (or the parents) eligible for a tax break changes from tax law to tax law.
In many cases, there also are income limits on child-related tax benefits.
But if you have kids or are planning to, it's worth checking out how the tax code can help cover some of the ever-growing expense of rearing a child.
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