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Proud Parents

It's great having children: the fun, the love, and the tax benefits.  As a parent, here are some of the many things you should consider when filing your tax returns as it relates to your family and tax credits and deductions.

1. Promptly after your child's birth remember to apply for a social security card.
Just file Form SS-5.

2. A child can be claimed as a dependent in the year they are born.

3. You may be able to take child tax credit up to $1,000 for each of your children under age 17. Those who may not benefit from the full amount of the child tax credit may be eligible for an additional refundable child tax credit.

4. If you are working or looking for work and you are paying someone to look after little Tommy who is only 12, you may be able to claim child and dependent care credit.

5. If you adopted a child, you may be eligible to claim adoption credit. You will need to submit qualifying expenses.

6. If you are a single parent, by changing your filing status to Head of Household you may be eligible to use a more favorable tax table or rate schedule. (Your marital status is determined for the entire year based on the last day of the year. However, different rules may apply to separated but not yet divorced taxpayers.)

7. Has your child earned monies from working? If so, they may be required to file a tax return.

8. If your child (ren) has investment income, you generally will not have to file a tax return on his/her behalf if your child's income is $950 or less. However, under certain circumstances the kiddie tax may kick in if the unmarried child has investment income of more than $1,900. In that case, the child may be taxed at the parent's tax rate.

9. You may be eligible for the earned income tax credit (EIC), which is a tax credit for certain people who have earned income under $48,362 from wages, self-employment of farming. The EITC reduces the amount of tax you owe and may also give you a credit.

10. Paying for college is expensive. The good news is that you may be able to deduct interest that you pay on a qualified student loan. Since the deduction is claimed as an income adjustment you do not need to itemize your deductions.

11. It may pay for you or a family member to get additional college credits. Aside from any work-related salary adjustments, education credits can reduce your federal income tax dollar-for-dollar. Speak to me about income limitations.

12. Those of you who are self employed and paid for health insurance,  may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. (See Tax tips for the self employed for more good tax news.)