Here are 3 overlooked tax deductions & credits you may be missing
Child & dependent tax credit
Do you have children under the age of 17 who are claimed as dependents on your tax return? If so, you may qualify for a tax credit up to $2,000 per child. This credit is refundable up to $1,400; meaning if you do not use the entire credit to reduce your tax, a portion could be issued as a refund.
If your dependent children are over age 17 and you provide more than 50% of their care, you may qualify for a nonrefundable tax credit of $500 per dependent. Your dependent must live with you and receive more than 50% of their care from you. Other limitations may apply. Contact your tax professional for more information.
Dependent care tax credit
If you paid child care for your dependent child under the age of 13, you may qualify for a credit up to 35% on expenses up to $3,000 (one child) or $6,000 (two or more children). Child care may include daycare, summer camps, and babysitters as long as the primary reason for care is to assure the child’s well-being and protection.
To take the credit, you must identify all persons or organizations that provide care to take the credit. Be sure to request the name, address, and tax ID number (either social security number or employer ID number) of the care provider(s). This information must be reported on your tax return.
Note: Payments to your spouse, parent of your qualifying child under age 13, your other children under the age of 19, or a dependent whom you or your spouse claim on your tax return do not qualify for the credit. Care for other dependents over age 13 may qualify.
Student loan interest deduction
If you pay interest on qualified student loans, you may receive a deduction, up to $2,500, for the interest you pay on these loans.
Parents who pay student loans for their non-dependent children can pass the deduction on to their children. Parents who make the payment directly to the loan service provider are deemed to have gifted the money to their children. The child that benefited from those payments will receive Form 1098-E and may be eligible to take a deduction for the interest portion.
Note: Each parent may gift up to $15,000 per individual, per year without filing a gift tax return. It is important to keep track of payments made for student loans as they are considered part of the annual $15,000 gift exclusion. Limitations may change annually.