What... (i.e. camp, dance class, birthday party)
        
 
Pick a NYMetroParents Region: All Regions   Manhattan    Brooklyn    Queens    Westchester    Rockland   Fairfield    Nassau    Suffolk  

Resources

   

MY PRECIOUS LITTLE TAX DEDUCTION

     Home  >  Articles  > Family Finances
by Paula Vuksic, CPA

Related:


Soon after the birth of my daughter, Julia, a year ago, I fully realized and understood what a precious little bundle of tax deductions she was.  Yes, that’s right.  I said tax deductions.  What can I say? I’m a CPA who works in the tax practice of a major regional accounting firm, and that kid saved my husband and me $3,300 right off the bat!

   Listen, I’ll put up my love for my daughter against any mother’s this side of the Hudson River.  After my water broke in the fourth month, I spent the better part of five months in bed making sure Julia was safe and sound.  My daughter is my pride and joy.  But as a tax professional, I have only recently focused on all the tax benefits my family can now enjoy because of our addition. 

   I’m not surprised that I feel this way.  I love my job. What’s surprising is that it took me so long to realize that I gave birth to a 7 pound, 1 ounce tax deduction.  It was at least a couple of weeks after Julia’s birth, when I was rocking her to sleep in her room, that it came to me:   A child tax credit here, a dependency exemption there,  and long term, we have Section 529 plans to take advantage of; and so much more. 


   Researching deductions available to our family over the last few months was truly a labor of love and Julia was part of the process, sitting on my lap while I worked on the computer, looking up tax codes and creating a tax-savings plan.     

   My husband and I recently filed our first “with child” tax return, and like any parent will tell you, the costs of children usually outweigh the tax relief they provide.  But as a tax professional, I believe that’s even more reason to squeeze out every bit of tax advantage you can get from your child.  
   Having a child can be an overwhelming experience. Perhaps the last thing new parents are concerned with is tax implications of a newly expanded family.  But I hope you can benefit from some of the deductions and credits below, especially when you start to think about how your precious bundle racks up the diaper bills and grows out of clothes all too quickly. 

   But first, a cautionary note: the following figures are general amounts. and some of these deductions and credits are phased out when taxpayers reach a certain level of income, so consult your personal tax advisor in assessing the benefits available to you.

—First and most obvious is the additional dependency exemption, a deduction of $3,400 for new parents.  In addition to the exemption, there is a child tax credit, which allows a maximum credit of $1,000 for each child.  And for parents like us who have chosen to go back to work, there’s the child & dependent care credit, which allows deductions of up to $3,000 for the first child and $6,000 for two or more children on expenses related to child care.

—In conjunction with the child care credit, parents can exclude up to $5,000 from their gross income to reimburse for child care expenses through the employer dependent-care assistance program.  However, expenses which are excluded from income are not eligible to be put against this credit.  Anything under $5,000 which is not spent once again returns to taxable income.  

—It’s never too early to start thinking long term. I have 18 years to put aside money for my baby and to let it compound.  A Section 529 plan allows the money to grow tax-free and if it is ultimately used to pay education expenses, it will never be taxed.  Most plans can be started with as little as $1,000, although some people like to front-load the plans with their annual gifting.  It’s important to keep in mind, however, that your child can always get a scholarship or loan.  If choosing between a retirement plan and the 529 plan, put money away for yourself.  If you can max out on your retirement plan, the 529 is an excellent vehicle.  

—When my baby does go away to college (it’s already obvious to me that she’s Ivy League material), I will be able to claim the hope and lifetime learning credits for those expenses not covered by the 529 plan. Maximum hope credit is $1,650.  Maximum lifetime learning credit is $2,000.

—After all those years of footing the bill for your children, you can let them earn their keep and reap some tax benefits at the same time.  Having your son or daughter work for you becomes a deduction for your business, as long as it is reasonable, and let’s face it: You’re going to have to give them money anyway and at least you’ll know where they are.
   The bottom line is that while you enjoy your new addition to your family — as I do every moment of every day — also enjoy the tax break Uncle Sam provides.

PAULA VUKSIC is a CPA and tax professional with Citrin Cooperman & Company, LLP, one of the leading accounting and tax firms in the New York metropolitan area.  She works from their Springfield, NJ office.  


Get Your FREE Indoor Activity eGuide!

More Family Finances Articles

Junior Achievement of New York Brings More Than Money® Program to PS 212 in Jackson Heights

The Secondhand Goods Guide for Families
How to Teach Kids Financial Literacy and Money Management
Money-Related Gift Ideas for Kids
Family Finances: How to Open Up Financial Communication in Your Family

Be a good fellow parent and share this with a friend who would be interested
Email Friend

Local Family Finances Sponsors

Union Temple of Brooklyn
17 Eastern Parkway
Brooklyn, NY
718-638-7600
...

Highland Elementary School
193-10 Peck Ave.
Fresh Meadows, NY
718-357-4747
At Highland, we offer small classes with warm and ...

House of Orthodontia
122 Atlantic Ave
Brooklyn Heights, NY
718-852-4414
...

Mill Basin Day Camp
5945 Strickland Ave.
Brooklyn, NY
718-251-6200
Mill Basin Day Camp is dedicated to providing an e...

Long Island Science Center
11 W. Main St.
Riverhead , NY
631-208-8000
The Long Island Science Center's learning exhibits...
See Our Family Finances Directory

local zones

Nassau

Nassau cont.

Suffolk

Suffolk cont.

Westchester

Westchester cont.

Fairfield

Rockland

Rockland cont.

Queens

Queens cont.

Brooklyn

Brooklyn cont.

Manhattan

Copyright 2014 NY Metro Parents Magazine Site Design: THE VOICE