Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

Federal tax code has breaks for families with children

- by Alan Duvall 

Published in Dayton Daily News  October 21, 2007 

“You and I are their wings to help them fly ... aren’t they all our children.”  Celine Dion 

Hillary Clinton recently suggested every child born in America should receive a “$5,000 baby bond” from the government to fund future education or home purchases.  Not surprisingly, sources of payment for such a program were left to the imaginations of constituents. 

Such concepts are hardly revolutionary – in fact, federal government rewards for children are readily found in the tax code. 

Families are currently granted an annual $1,000 tax credit for every child under the age of 17. 

In addition, families receive a $3,300 personal exemption for each child dependant, an endowment generating an estimated $500 to $900 per child tax savings. 

Single parents with children receive benefit of a reduced “head of household” tax rate structure as well as an expanded standard deduction.   

Low-income families with children are also eligible for enhanced Earned Income Credit opportunities. 

Consistent with a political penchant for hidden taxes, the above federal benefits are typically reduced or eliminated for families of varying degrees of wealth. 

Those wishing to add to their families by way of adoption are rewarded with tax credits, or alternatively, tax-free income if adoption expenses are funded by qualified employer plans.

Government hand-outs even supplement continuing family costs for child up-bringing.  Examples of such largesse include credits for child dependant care and education as well as deductions for medical costs and qualifying student loans.

As a special dessert, children are given limited tax breaks on personal income from earnings and investments.  

Perhaps it would be cheaper for taxpayers if politicians simply took credit for the tax savings already bestowed upon families with children. 

“Promises ... sound so convincing, but you heard it before.”  Pat Benatar 

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.  Previous articles archived at www.duvallcpa.com.