Our 2 children r in India with parents & I'm paying cost of t/care. How can we get Tax credit/any Deducation ?

Question

Our Tax withheld is more than $6000, weather we could take child tax credit or any deducation. Please provide me other method so we save max. tax. Only my wife(citizen of U.S) has 401(k) plan. I'm U.S (green card holder) resident.

Answer 1

Bostonianinmo is correct; there are no tax benefits for your children living in India.
If you want to pay less in income taxes start shifting you income into things that are tax advantaged like; IRA’s you probably qualify for a spousal IRA or a traditional IRA, capital gains (stocks or mutual funds) and dividends, good rental real estate.
The tax laws favor investors and families with children, since your children don’t live in the US be an investor.

Answer 2

I am assuming the children are US citizens and that you are going to file a joint return with your wife.

First, how long have the children been in India? If it is just a temporary visit, even for a few months, then that is not considered time away from home. If the children are in India in order to go to school, this is also not considered time away from home. If this is the case, you may be able to claim your children as "qualifying children" by combining the time the children lived with either you or your spouse, plus the visit to the grandparents. On your tax return, you would indicate the total time with the grandparents plus the time in your home as the time the children lived with you.

If you are able to claim that the main home of the children is your home, and the time in India is a temporary arrangement, then you can get the Child Tax Credit for your child(ren) under the age of 17.

If the children are permanently living with the grandparents, the above does not apply, and your children cannot be your "qualifying children."

You could try to argue that the children are not the qualifying children of anyone, if it is true that no one living with the children is subject to US income tax. You could try to claim the children as "qualifying relatives" based on the following:

1. They are your relative
2. They each have income under $3,400
3. You provide over half of their support
4. They are not the qualifying children of anyone

If you claim the children as "qualifying relatives" then all you will get is the $3,400 dependency exemption for them. You will get no Child Tax Credit or Earned Income Credit. So this route isn't worth a lot and may be asking for an audit.

Answer 3

Your children must live in your home for you to claim the tax exemptions for them. Since they don't live in your home, you cannot claim the exemptions. There are no credits that you qualify for by paying your parents to care for your children outside of the country.

Additionally if they are not US citizens themselves they must live in the US for you to claim them as dependents on your tax return.