Jackson Hewitt(R) Weekly 'Tax Time Tip': Joys of Child Rearing Include Child-Related Tax Benefits

PARSIPPANY, N.J. // PRNewswire-FirstCall // -- Having a child is one of the most important milestones in many people's lives, and while tax savings are not the first things that enter a parent's mind, it is during tax filing time that many parents realize that there are a substantial number of credits and deductions available to taxpayers with children. Jackson Hewitt Tax Service® reminds taxpayers with children about new and long-standing tax considerations that may help them receive a larger tax refund, if due.

This Week's Tip: There are numerous tax laws that relate to dependent children, ranging from credits for adoptions and child care to deductions for certain child education expenses. While taxpayers with children may know about some of these credits and deductions, it is important to know about the new and changed rules to ensure they are claiming all the credits and deductions they qualify to receive.

Understanding How a Child is Defined

The Uniform Definition of a Child establishes that for tax purposes, a child is the natural child, stepchild, adopted child or eligible foster child of a taxpayer. An adopted child is one who has been legally adopted, or a child who has been lawfully placed by an authorized placement agency for legal adoption. An eligible foster child is one who has been placed by an authorized agency or by a judgment, decree or other order of any court of competent jurisdiction. The Adoptions Act of 2008 modified the Uniform Definition of a Child to include the caveat that a child must be younger than the claimant and generally unmarried. Also, if a non-parent claims a child who is also a qualifying child for a parent, the non-parent's adjusted gross income (AGI) must be higher than the parent's.

Important Changes Parents Should Know About

One of the most popular tax credits, the Earned Income Tax Credit has been expanded for tax year 2009 to allow those with three or more children a chance to qualify for an increased amount of credit. In addition, there have been increases in both the amount of the credit and the income limits to qualify:

  • The credit is up to $5,657 if you are married filing jointly, have three kids and have income less than $48,279
  • The amount available for families with one or two children has also increased to $3,043 and $5,028 if married filing jointly and income is less than $40,463 and $45,295 respectively
  • The amount available for taxpayers with no children filing as married filing jointly is $457 if income is less than $18,440

"The Child Tax Credit provides up to $1,000 for each qualifying child under age 17 at the end of the year," said Mark Steber, Chief Tax Officer, Jackson Hewitt Tax Service Inc. "It is important that filers know how a child qualifies. Generally, the child must be a U.S. citizen or national or a U.S. resident for some part of the year, have lived with the taxpayer for more than half of the year, not have provided more than half of their own support and is claimed as a dependent."

Also, more working taxpayers are now eligible for the Additional Child Tax Credit, a refundable credit. Taxpayers who earned $3,000 or more with dependent children under the age of 17 may qualify for up to $1,000 per child.

Other Tax Considerations

Working parents, or those who were working and are now job searching, may be able to claim a credit to help with child care expenses. The credit may be as much as $1,050 for the expenses for one qualifying child or $2,100 for more than one child, depending on the taxpayer's adjusted gross income.

Those who adopt a child and pay adoption expenses may be able to take a credit for qualified expenses of up to $12,150 per child. If the taxpayer's modified adjusted gross income is over $182,180, the credit begins to be phased out; the credit is not available to those with a modified adjusted gross income of $222,180 or more.

Parents who are paying a child's qualified tuition and related higher education expenses can take advantage of the American Opportunity Tax Credit, which requires the student to be enrolled at least half-time in one of the first four years of post-secondary education, or the Lifetime Learning Credit. A taxpayer cannot claim both a Lifetime Learning Credit and American Opportunity Tax Credit for the same student in the same year.

Parents can also claim the Tuition and Fees Deduction for a child, which covers up to $4,000 in expenses for enrollment or attendance at an eligible educational institution and is available to those with a modified adjusted gross income of $65,000 or less ($130,000 or less if married filing jointly), but no more than $80,000 ($160,000 if married filing jointly).

To explore all of the tax credits and deductions related to a child, consumers are encouraged to visit the Resource Center section of the Jackson Hewitt Web site.

About Jackson Hewitt Tax Service Inc.

Jackson Hewitt Tax Service Inc. (NYSE: JTX), with more than 6,000 franchised and company-owned offices throughout the United States, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey.

SOURCE Jackson Hewitt Tax Service Inc.

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