Articles and Advice
Lower Your Taxes or Increase Your Refund
It’s that time of the year again: Time to pack up seasonal decorations, earnestly attempt to keep New Year’s resolutions, and decompress from a busy December. But before you get too comfortable, remember that this is also a great time to prepare for tax season.
Did you know you may be eligible for federal and state tax credits to help pay for your child's early childhood education and care? Credits reduce the income taxes you pay or increase your tax refund. A tax credit is even more valuable to families than a tax deduction. A tax credit is a dollar-for-dollar reduction in taxes owed. Some credits are refundable, meaning taxes can be reduced to the point that a taxpayer receives a refund instead of paying taxes.
The federal Child and Dependent Care Tax Credit can help reduce your employment-related child care costs by providing a non-refundable tax credit of between 20% and 35% (depending on income) of the first $3,000 you spend on care for one child, and the first $6,000 you spend on care for two or more children. Determined on a sliding income scale, families may have their federal taxes reduced by as much as $2,100.
The federal Child Tax Credit reduces your federal income taxes by an additional $1,000 per child less than 17 years of age.
The federal Earned Income Tax Credit is a refundable federal income tax credit for low to moderate income working individuals and families. Eligible families may qualify for a credit up to $5,657.
In addition to the federal tax credits, 28 states, including the District of Columbia, have their own child and dependent care tax credit and 23 states, including the District of Columbia, have their own state Earned Income Tax Credit. New York, North Carolina, and Oklahoma even have provisions for a state child tax credit.
If you want to learn more about these tax benefits and other opportunities to make child care expenses more affordable, please visit www.knowledgebeginnings.com/taxcredits for more information.
As you prepare for tax day, don’t forget to reach out to your Knowledge Beginnings Center Director for your "Year-End Statement.” Also, remember to consult your tax advisor, the IRS, and state revenue officials to confirm your eligibility and to answer questions.
For Enrolled Families:
Beginning January 22, 2010, you can request a "Year-End Statement" from your Knowledge Beginnings Center Director. This statement is intended to provide you with a tool to assist with your income tax return preparation and help you determine the appropriate amount of dependent care expenses to claim.
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