2nd Quarter 2019

Tax Breaks for Parents

It’s expensive to raise children, but Uncle Sam provides several tax breaks that can help offset some of the cost.

Child-care credit for summer camp and more. If you have children under age 13 and you and your spouse work, you can claim a tax credit for the cost of daycare, preschool, a nanny, before- or after-school programs, and even summer day camp. The credit is worth from 20% up to 35% of qualifying expenses of $3,000 for one child, or up to $6,000 of expenses for two or more children (the lower your income, the larger the credit). See IRS Publication 503 at www.irs.gov

Tax breaks for college tuition. If you pay tuition for the first four years of college, you may qualify for the American Opportunity Credit, which can be worth up to $2,500 per student. To qualify in 2019, your income must be less than $90,000 if single or $180,000 for joint filers. See Publication 970 at www.irs.gov.

Tax-free 529 withdrawals. In addition to withdrawing money tax-free from a 529 plan for college tuition, room and board, fees and books, you may also withdraw up to $10,000 per year from 529s for kindergarten through 12th grade tuition (some state may have special rules).

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