Tax tip for today: Why do people ever decide to give up their freedom and have kids? Well – for the tax benefits of course! So just how many tax dollars is a child worth? Well, without discussing the possibility of secondary education credits, state tuition and textbook credits, income phaseouts, or the dreaded AMT tax, I am going to give a very simplistic answer. A child is worth $1,000 (child tax credit) PLUS ($4,000 x your top tax bracket). So if you are in the 15% tax bracket, your child is worth $1,600 in reduced taxes. At 25%, it’s $2,000 in savings. Why do I bring this up? Well, dependency exemptions generally start to go away when a child reaches age 19 (or 23 if they attend college full-time and you still support them), and the child tax credit goes away once your child reaches age 17 (no exceptions). For this reason, taxpayers with kids are often caught completely off guard and unprepared when their kids begin reaching these ages. Parents who are claiming several exemptions for withholding purposes often think I’ve made a mistake when I tell them they owe money at the end of the year, when in actuality, they are just losing deductions and credits that they’ve been able to take for so many years. If your kids are approaching these ages, it may be time to re-visit your tax plan to make sure you’re covered. For help with this or any other tax planning needs, contact Hicks Tax & Accounting.