Taxes can be seen as a burden or an opportunity to get ahead. Black families often feel under the gun during tax season and frankly, it can all seem a bit overwhelming. It doesn’t have to be this way. Knowledge is power and when it comes to the tax code, you can never have enough of it. Here are a few things to keep in mind during tax season.
Tax Credits
Not all tax credits are for rich people. In fact, there are a number that are available for working families. Make sure you know them and get all the details at IRS.gov.
Childcare Expenses
If you pay for childcare so that you can work, make sure you claim the Child and Dependent Care Credit. Also, see if your employer offers dependent care benefits, such as a Dependent Care Flexible Spending Account (FSA). You’ll put more back in your pocket.
Credit for Child and Dependent Care Expenses
If you work and pay for childcare expenses, you need to be aware of The Credit for Child and Dependent Care Expenses. You may be able to get roughly 35% of qualified expenses (the percentage will be based on your income). The expenses must be related to children under age 13 when the care is provided. Also, the child and dependent care expenses must be paid so that you (and your spouse, if filing jointly) can either work or actively look for employment.
Healthcare Expenses
You need to make sure you’re taking advantage of pre-tax health care tools. For example, see if your employer offers a health care Flexible Spending Account (FSA). If you’re relatively healthy you may also consider a health insurance plan with a Health Savings Account (HSA), which has a higher deductible but helps you save a lot of money pre-tax.
Retirement Savings
Retirement may not be on your mind now but it needs to be. If you’re already making contributions to a retirement plan, keep it up! One thing you may want to consider is increasing your contributions to pre-tax retirement accounts. That would not only help you save for retirement but also, it would lower your taxable income.
Not All Dependents Are Children
You know about the Child Tax Credit but there’s also the Credit for Other Dependents, also nicknamed the “Family Tax Credit.” For dependents who don’t qualify for the Child Tax Credit, this credit will provide you hundreds of dollars. Perhaps you have older children who are dependent or elderly parents that you care for. This credit is for you.
