It’s not a lot of fun to be out of work when you have children to take care of, but you may get some help when you file your taxes. Jobless parents can still claim kids as dependents. That can help cut your tax bill. In fact, you might get back money even if you haven’t paid any taxes.
Kids and Taxes
Even if you have no earned income for the year, the Internal Revenue Service may still want you to file a return. For example, unemployment benefits are taxable, and you have to report them to the IRS. If you file at all, you can claim a child as a dependent and get the exemption. As of 2012 each dependent exemption was worth a $3,800 deduction of taxable income.
A qualifying child has to be under age 19, or 24 if she’s a student. There’s no age limit if a child is disabled. Qualifying children have to live with you at least half the year and don't earn more than half of their living expenses on their own. You can claim children besides your own if they're related to you. Stepchildren, adopted children, foster children and your brothers and sisters are all eligible. When these kids have kids, their offspring are also eligible.
Child Tax Credit
A dependent child under 17 makes you eligible for the Child Tax Credit, the Additional Child Tax Credit, or a combination. The Child Tax Credit is for $1,000 or your tax liability, whichever is less. If you can’t get the entire grand, you could claim just enough of the Additional Tax Credit to bring the total up to that mark. This means you can get a $1,000 refund for each kid even if you have no income at all.
More Tax Credits
If you've got kids 12 and under, or a child that can’t take care of himself, you may qualify for the Child and Dependent Care Credit. When you pay for child care while you look for work or go to work, you can get up to $1,050, or $2,100 for two or more children. The credit can’t be for more than your tax liability. If you or your spouse have earned income, you're eligible for the Earned Income Credit. The amount depends on your income and number of children you're trying to claim.
- Internal Revenue Service: In 2012, Many Tax Benefits Increase Due to Inflation
- Internal Revenue Service: Topic 418 – Unemployment Compensation
- Internal Revenue Service: A “Qualifying” Child
- Internal Revenue Service: 10 Facts about the Child Tax Credit
- Internal Revenue Service: Publication 503 (2011), Child and Dependent Care Expenses
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