2000 Year-End Tax Planning
For Families
The following are generally applicable year-end
tax-saving tips for families. However, individual circumstances can have a significant
impact on the appropriateness of tax strategies for a particular person. Contact us for a
tax-planning meeting where we can discuss which approach would be best for you.
- Look into the child tax credit, a $500 credit against
taxes for each child under age 17. Note that the credit begins to phase out if your
modified adjusted gross income exceeds $110,000 for a joint return ($75,000 single). If
you're likely to exceed this threshold, some creative tax planning may be needed.
- If your child has been working this year, encourage
him or her to open a Roth IRA. The earnings will be tax-free, and the extra compounding
effect of starting to save in the teenage years will make a huge difference at retirement.
If your child needs the money earlier, it can be withdrawn penalty-free for education or
home buyer expenses. Of course, your child is probably working to earn spending money, not
retirement savings. In this case, consider giving your child the money to fund the IRA.
- If you adopted a child, you may be eligible for a tax
credit of up to $5,000 for qualified adoption expenses.
- Don't forget the child care credit. If you pay child
care expenses for a dependent under age 13 so you and your spouse can work, you may be
able to claim a credit against taxes of up to $720 for child care expenses ($1,440 for two
or more children). The rules are complicated, so contact our office if you think you
qualify.
- Be sure you have documentation on college tuition and
expenses paid for yourself as well as other family members.
- Other planning opportunities come from
the $2,800 exemption for each child who qualifies as a dependent. Children can qualify up
to age 24 if they're enrolled as full-time students, so don't overlook your older kids in
college if you still support them. With careful planning you may be able to claim them as
dependents. And divorced parents can arrange to assign the dependency exemption from the
custodial parent to the non-custodial parent if it makes more tax sense.
- Review the tax breaks for college expenses. Tax
planning can play a big role in how you choose to fund college expenses for your children,
or even for your spouse or yourself. Starting in 1998, two new tax credits became
available, as well as new tax breaks on state tuition programs. There is also another type
of IRA, called an Education IRA, which can be used to fund college costs.
© Copyright 2000 Raymond S. Kulzick. All rights reserved. 001124.
This publication provides business, financial planning,
and/or tax information to our clients. All material is for general information only and
should not be acted upon without seeking appropriate professional assistance.
Contact rkulzick@kulzick.com with questions or
comments about this web site.
Copyright © 2000 Kulzick Associates, PA - Last modified: September 13, 2008