Top Three Ways to Decrease Taxes for Families

When you’re a single person living on your own or with roommates, chances are that your taxes aren’t all that complicated. It’s also likely that you have a little more money than the average married person and/or parent. This is all due to the fact that families, especially families with children, tend to have a lot more expenses to take care of. They also tend to have more tricky things to list on their tax forms and more questions about their appropriate filing status. The good news is that there are ways in which families can make the process easier and save money on their taxes at the same time. We’ll share three of them here, but keep in mind that, with a little research and effort, there are many more ways to save.

1.)    Make Your Education Work for You

Whether you’re a parent and/or spouse who wants to go back to school, or a soon-to-be empty-nester about to send a child off to  college, you can make the newfound educational status of your home work for you. If you have an IRA, for example, you can withdraw money from it to pay for tuition, books, and other education-related expenses. The great news about this is that, because the money is being used for education, there’s no withdrawal penalty to pay.

2.)    Love for Little Ones Equals Savings for You

Being a parent is hard work, hard work that costs you a lot of money. It’s only fair then that you are entitled to the child tax credit, which could grant you as much as $1,000 per child in your care, dependent upon your income. Certain restrictions, which vary for independent and joint filers, do apply, but many people are eligible for this credit. It’s not just good for those with biological children either. You can earn the credit for stepchildren, adopted children, foster children, and any minor for whom you serve as legal guardian.

3.)    Wedding Bells are Ringing!

The moment when you actually become a family—the moment when you get married—is the perfect time to start saving on your taxes. A new marriage or, surprisingly, a new divorce, allows you to make changes to your medical reimbursement plan, changes that can help you to save.  If you think a spouse is likely to become pregnant and acquire medical expenses, for example, that’s a good time to put more money in your account. If, however, you’re both young and healthy, you can reduce the amount.

While there are a wide variety of ways in which families can save on taxes, one important rule of thumb to keep in mind is that any time there is a major change in your life—the birth or adoption of a child, a wedding or divorce, or a purchase of a new home—your taxes are going to need to change too. More often than not, the changes in your life will lead to positive changes in your taxes.

Have a tax question? Ask one of our tax professionals.