Over the next two days, taxes will be weighing on the minds of millions of American parents.
It is projected that more than 32 million families will face a tax bill this year, but additional tax relief may be available for millions of parents because of the new tax laws Congress passed last year.
For example, many tax brackets were lowered. Those who were paying 27 percent now pay 25 percent; those who paid 30 percent now pay 28 percent; those who paid 35 percent now pay 33 percent; and those in the 38.6 percent bracket will now pay 35 percent.
Similarly, there are new enhanced tax credits and deductions available for the 2003 tax year that can still be taken advantage of, even though the April 15 filing deadline is fast approaching. It is important to make sure that you are taking advantage of new laws that work to your family's benefit, and that you take proper precautions to make sure the Internal Revenue Service does not rain on your post-tax celebration.
Child Tax Credits
So far, the child tax credit is the biggest source of mistakes on 2003 tax returns, with more than 2.3 million people having already made errors related to it. Assuming your family meets income requirements, the child tax credit is $1,000 for each child under the age of 17 in 2003, up from $600 per child in 2002.
However, when completing your 2003 tax return, do not forget to subtract any advance credits you may have received last summer. Specifically, 25 million taxpayers received an advance credit of up to $400 per child last July or August. If you were one of these taxpayers, you will have to subtract the amount of your advance and only take a partial credit. For example, if you received an advance credit of $400 for each of your two children (a total of $800), rather than getting a tax credit of $2,000, you should account for a credit of $1,200. These advance credits were based on the amount of income you earned in 2002. If your income rose in 2003, you may have received a larger check than you were entitled to, but the government is not collecting any overpayments, so you can keep the money.
With more than 4 million babies born each year, many new parents may be eligible for a child tax credit. If you had a baby or adopted a child in 2003, you would not have received the advance child tax credit, and may be eligible for the full credit if you meet certain income requirements. To be eligible, married couples filing jointly can earn up to $110,000; married couples filing separately can earn up to $55,000 each; and single filers can earn up to $75,000. The credit phases out if your income exceeds these amounts.
Although you may financially support your kids well into their adulthood, you need to be careful about claiming them as dependents, especially if they file their own returns and claim themselves.