Dads can wear a lot of hats in their lives - business owner, professional, designated tickle monster, coach and more. This Father’s Day, we celebrate all the great dads and dads-to-be with a list of handy tax-related benefits, along with some commonly overlooked tips, that come with being a dad:
Newborn medical expenses – Is this your first Father’s Day? If your child was born in 2022, you may be able to deduct the medical expenses you paid (anything since January 2022). Eligible expenses include the costs for the birth of your child, well-baby check-ups, and other medical visits for babies and parents. You have to itemize your deductions and subtract 7.5% of your Adjusted Gross Income (AGI) from your total medical expenses.
New children mean new credits – Having a new child can be one of the greatest tax benefits for your tax return. You are no longer able to claim a dependent exemption amount for children, but you can claim various child-related tax credits. These credits include the Child Tax Credit, the Child and Dependent Care Credit (commonly referred to as the “daycare credit”), and the Earned Income Tax Credit, which is available for families with an income of less than $56,000.
Adopting a child – If you adopted a child in 2022, you may be eligible for the Adoption Credit, up to $14,080 per child. The child can’t be a stepchild to you or your spouse. If you adopt children considered to be special needs by the local Department of Family Services, your credit is not based on adoption costs. Instead, you are automatically eligible for the full amount of $14,080 per child.
Educating yourself - If you are enrolled full-time in an undergraduate or certificate program, you may be eligible for the American Opportunity Credit. This is a refundable credit of up to $2,500 of qualified tuition, fees, and expenses, with $1,000, or 40% of the credit, treated as refundable. If you take classes at a college, vocational school for any reason including pursuing your graduate degree, work-related, or just for fun, you may be able to claim the Lifetime Learning Credit. This is a non-refundable credit of 20% (up to $2,000) of qualified tuition, fees, and expenses you paid for yourself, spouse, or a dependent. With the Lifetime Learning Credit, your classes do not have to be part of a degree or certificate program.
Selling your home – Whether your family has grown or you find yourself in an empty nest, you may want to move from your current home. One of the best tax breaks for homeowners remains unchanged: Up to $250,000 ($500,000 if you’re Married Filing Jointly) of profit from the sale of your house could be tax-free. Keep the receipts for any home improvements you do, such as installing new carpet, closet organizers, or even new kitchen cabinets. You can include the cost of these improvements in the basis of your home when you sell.
Real estate and personal property – You can deduct up to $10,000 of your real estate and personal property taxes, and either your state and local income taxes or sales taxes.
Volunteering – If you volunteered in 2022 for your children’s teams or activities – for example, coaching the soccer or little league team – you may be able to claim a charitable contribution deduction if you itemize. Your mileage to and from the volunteer activity is deductible at 14 cents per mile, and out-of-pocket expenses for necessary supplies such as equipment and uniforms are also deductible as charitable contributions. Remember to keep those receipts and a mileage log for all your travel as a volunteer!
Camp credits – Are your children under age 13, and did you send them to a day camp in 2022 while you and your spouse worked? If so, you may be able to claim a credit on your expenses. You may be able to claim a credit of between 20 and 35 percent of these and other daycare expenses up to $3,000 ($6,000 for two or more children) on your income taxes. Make sure you get a receipt from the daycare provider(s) and the day camp.
Remember your filing status – If you are a single dad, don’t forget to file with the correct filing status. You may be eligible to use the Head of Household filing status if you have physical custody of your child for more than half the year, are single, and provide the main support for your household. This will qualify you for lower tax rates, higher credit amounts, and potentially, many other tax benefits.
We know fatherhood involves a lot of sacrifice and hard work. The work you do at home or at work does not go unnoticed. You should enjoy the tax benefits that come with being a dad. Whether you’re a new father, seasoned pro, or empty nester, you deserve a break (and maybe someone else doing the grilling or taking you to dinner). Happy Father’s Day, dads!