We had our first child in July, what does that mean for our income taxes?

Question

1. Do we get some kind of a child credit now? If so, how much?

2. We did not change our exemptions, how much extra would 1 extra deduction translate into our refund?

3. I think I read somewhere that we can deduct the amount we spend on daycare. Is this true?

Anything else we should be aware of?

I have already checked the IRS website and it was not much help at all as far as translating everything to real dollars...

Answer 1

You'll get all the things you list - a child tax credit of $1000, an additional exemption (was $3200 last year), and probably a credit for a portion of your day care expenses.

The $3200 exemption would translate to $480 if you're in the 15% bracket. Exemption amount may increase slightly for 2006.

The limits for earned income credit is $13,750 income between the two of you with no child, but $33,030 with one qualifying child, so if you make less than that, you might be eligible for the EIC now where you weren't before. These are 2005 numbers, and might change for 2006, but probably not by much.

Answer 2

You will receive a child credit of $1000 as long as your adjustd gross income is under $110,000 filing married filing joint. You also will receive an additional exemption deduction of at leat $3200.00 and depending what tax bracket you fall into could save you anywhere from $480.00 - $800.00. If both parents work and you file jointly you would get a child care credit equal to at least 20% of what you paid up to $3000 (3000 x 20% = $600 credit) The credit could be more than 20% depending on income. Hope that gives you a basic idea of your tax situation. There could be other factors that may affect these deductions and credits. I would seek a professional tax person such as an Enrolled Agent. Not only will the tax return be prepared corectly they can give you tax planning tips for the future years such as home ownership, the kids college etc.

Answer 3

You can deduct the money you spend on daycare in certain situations. You get a larger exemption amount for a child and may qualify for a child tax credit. It's impossible to give a dollar amount/

Answer 4

Yes you may receive a child tax credit. Not more than 2400. It depends on your income exactly how much you get. This info is on the Child Tax Credit worksheet.

the exemption amounts have not come out for the 2006 tax year yet.

yes you can deduct the amount you spend on daycare. You will need the Daycare name, address, and EIN or SSN of the provider and the amount you paid them. Again it depends on your income how much the credit will be on your tax return. This info is on Form 2441.

Answer 5

You can claim the child as a dependent this year. The tax credit is (I believe) $500.00.

Why would you want a bigger refund. The IRS is holding YOUR money INTEREST FREE. They give you back YOUR MONEY at the end of the year. Do you not need that money right now in your pay? To hell with a bigger return. Bad money move.

You can deduct a portion of daycare.

Get the instructions for the 1040 form. It explains everything you want to know. It is helpful - unlike the website.

Answer 6

You get a credit for each dependant you have. You'll find the line for it on your income tax form you fill out next time. I usually use TurboTax, but any other tax software would help you with this as well.

3. Yes. Childcare is deductable. Your childcare provider should give you a receipt of some sort at the end of the year with his/her/their ID number and how much you have spent with them over the year. Again. Any Tax preparation software or H&R Block would help you with this.

Answer 7

That means that after the first of the year when you do your 2006 tax returns. He or she can be used a a tax deduction. I wouldn't change my exemptions because that will mean more money when you do your tax return.

Answer 8

you can now claim them as a dependant and you will get more back.
once they start school you can do the earned income tax credit as well.
Check out www.irs.gov for more information.