Jul 122011
 
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When tax time comes, parents have reason to be happy: there are a number of tax credits and other benefits offered only to parents. Tax professionals are often in the best position to identify those credits and other benefits. In fact, some studies show that parents who consult tax advisers save more than $3,500 on their annual tax bill.

Here are ten of the best tax benefits for parents.

1. Exemptions for Dependents. For every child who qualifies as dependent, parents reduce their taxable income by $3,650 in 2010. With three dependent children, taxable income is reduced by more than $10,000.

2. Child Tax Credit. Dependent children under the age of 17 qualify parents for the Child Tax Credit, which can be as much as $1,000 per child. There are limits on income to receive the full amount, so consult a tax adviser.

3. Child and Dependent Care Credit. Parents with children under age 13 who paid for childcare so they could work are often eligible for this tax credit.

4. Earned Income Tax Credit. Parents who have earned income during the year often qualify for this credit. Rules apply, so consult a tax adviser.

5. Adoption Credit. For parents who adopt a child, this credit can be worth as much as $12,150 depending on the circumstances.

6. Children who Earn Income. It is best to consult a tax adviser regarding whether children earning income need to file tax returns.

7. Investment Income. Depending on the circumstances, a child’s investment income may or may not be taxable at the parent’s tax rate. Parents should consult a tax adviser.

8. Higher Education Tax Credits. Recent tax laws have introduced new and modified existing credits for higher education. For parents whose children no longer qualify for the Child Tax Credit, these Higher Education Tax Credits can be a real boon.

9. Student Loan Interest Deduction. Parents can now deduct any interest they pay on their children’s student loans.

10. Health Insurance Deduction. For self-employed parents, health insurance premiums paid for children up to age 27 can now be deducted.

Barry W. is a fan of science fiction, and when he is not crafting the perfect light sabers with his sons he looks for tips to give to parents to help them deal with the economic situation in the US.