Paying your taxes and your bills is easier when you take advantage of tax deductions and credits for your wife and kids. Claiming these benefits when you file your tax return may reduce your tax liability by thousands of dollars. Another plus is that you can get the benefit of some tax deductions every payday through reduced payroll tax withholding.
Personal and Dependent Exemptions
For married couples filing a joint return, each spouse gets one tax deduction called a personal exemption. The amount of a personal exemption is $3,800 for tax year 2012. If you don’t itemize your tax return, the personal exemptions are added to the standard deduction for each spouse, which is $5,950. Added together, these deductions for yourself and your wife come to a total of $19,500. In addition, you get one exemption for each dependent child. The dependent exemption is the same amount as the personal exemption. If you have two kids, these exemptions allow you to deduct $3,800 each for a total of $7,600.
You can claim your kids as dependents as long as they are less than 19 years old, live with you for at least one-half the year and do not provide more than one-half of their own support. The age limit is extended to children under age 24 who are full-time students. There is no age limit for claiming a child with a disability. You may be able to claim children other than your own, provided they meet these qualifications. Eligible children include stepchildren and adopted or foster children. Siblings are also eligible, as are descendents of any of these.
In addition to the deductions discussed above, you may be able to claim tax credits. If your two kids are less than age 17, you may be able to get a $1,000 Child Tax Credit for each. When you and your wife must pay for childcare expenses because you both work or must look for work, you qualify for a Child and Dependent Care Credit of up to $1,050 per child. The maximum is $2,100 for two or more children.
When you claim withholding allowances on the W-4 form you fill out for your employer, each allowance is equal to the amount of a personal exemption divided into equal amounts for each pay period. This allows you to get the tax savings right away instead of waiting until you file your taxes. You also get one withholding allowance for each member of your family. IRS rules may allow you to claim additional allowances as well. These include withholding allowances for the Child Tax Credit for each of your kids. If you expect to spend $1,900 or more for work-related childcare expenses you can claim more allowances. These additional allowances allow you to get the benefit of the tax credits without waiting until it’s time to file your taxes.