Children are Priceless, but Don’t Forget the Tax Breaks!

Leave it to a financial planner to remind you that children are … well … expensive.  Cribs, car seats, food, clothing, diapers, and the like can put a dent in the budget — and these expenses are part of the “cheap” years! (The U.S. Department of Agriculture estimates that it costs $196,010 to $393,230 to raise one child from birth to age 18).

As a father of three, I fully appreciate what gifts our children are: the priceless hugs (minus the sticky fingers, please), carefully crafted artwork for prominent display at the office, and “Daddy, can I go with you?” requests. In between all of the priceless moments happen to be some pricey moments as well. There’s no way around it: Having children costs money.

Fortunately, you may be entitled to some income tax breaks that can help defray the cost of raising your child. Most parents will receive a $3,500 exemption for each child. (Please don’t introduce your child as “this is my new tax deduction”.)

You may also qualify for one or more child-related tax credits:

The bottom line: The above tax deductions and credits might just put some money back into your budget, allowing you to focus on the priceless times. As always, for more information about tax issues and how they apply to your specific situation, talk to your tax professional.

– Timothy Wyman, CFP, JD

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