Ellie Kay, a Moms Money Clinic advisor for Parents, guest blogs regularly to answer mail about money issues. Today she's helping parents prepare for tax season.
Q. We recently had our first baby. Is it time to hire an accountant, or can we just use a tax software program? What are some things we should be aware of when filing this year?
A. Congratulations on your new arrival! As a mom of seven, I know that having kids is both a joy and a nice tax break. You should be able to save money by using tax software, because all the info you need is in these programs. Here are some important guidelines:
Direct Deposit If you're getting a refund from the IRS, choose direct deposit and e-file your return for the fastest possible processing. That way you'll also be able to track the status of your return and refund.
DIY for Free You can file your federal taxes for free at TaxAct.com. It will guide you step-by-step through benefits, deductions, and your entire return.
Don't Spend It! If having a new baby makes you eligible for a tax refund, avoid spending the money. Instead, pay down your debt (such as credit card balances and student loans), beef up your savings account, or invest it in a 529 college savings plan (for your baby's future) or an IRA or Roth IRA (for yours).
For more on filing, go here.
Q. I am a military spouse and mom. What tax benefits should we look for when completing our return?
A. As a military spouse for 20 years, welcome to the club! There are many tax benefits for members of the U.S. Armed Forces and their families. For example, you don't have to pay taxes on certain income and benefits, including:
- The Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS).
- Dependent-care assistance programs.
- Combat pay.
You may also be eligible for these deductions:
- Moving expenses for a permanent change of station.
- Unreimbursed travel expenses (if you travel more than 100 miles from home for service), including mileage, meals, and lodging. Be sure to keep detailed records and receipts.
- You can claim a $3950 exemption for each qualifying child. Also be aware of the Child Tax Credit (worth up to $1,000 per child) and the Earned Income Tax Credit for lower-income working individuals and families. The amount of your credit depends on your adjusted gross income and the number of children.
While it's important to file your tax return on time, do you know when yours is due? The deadline is April 15 for most Americans, but if you or your spouse is serving outside the U.S. or in Puerto Rico on that day, your tax return isn't due until June 15. If you or your spouse is stationed in a combat zone, your return is generally due 180 days after your last day stationed there, or your last day in a hospital for injuries sustained in combat. If you need to file a state return, TaxAct offers it for $5 to military families. You'll receive it automatically after entering your Form W-2 information.
Please thank your spouse for his service!
Ellie Kay is a family financial expert, the author of The 60-Minute Money Workout, and a mom of seven. Read more of her advice at elliekay.com.
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