You may think that there is no way to connect tax tips with Father's Day, but you'd be mistaken. Not only are there a great many tax considerations related to fatherhood (and motherhood, too!), many of them are often overlooked. So to mark Father's Day, here are some tax-specific ways to take advantage of the unique benefits of being a dad.
To start, there is no better tax benefit than having a new child on your tax return. You will likely be able to claim an additional exemption amount for the child as a new dependent, but you can also 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 even the Earned Income Tax Credit, which is available for families with an income of less than $51,567.
If this is your first Father's Day and your child was born in 2013, you may be able to claim the medical expenses you paid (anything since January 2013). Eligible expenses include costs for the birth of your child and all baby and first-time parent medical check-ups.
What about gifts from your family this year? If you avoided getting yet another tie or pair of socks and instead received a gift card to the local home improvement store, you may be able to get a tax credit, depending on what you purchase. For example, an Energy Credit of up to $500 is available if you use that gift card to replace your hot water heater, air conditioner, furnace or windows or upgrade your insulation. The credit is available for approved energy efficient improvements and is worth up to a lifetime maximum amount of $500.
If you are unable to claim the credit, you should still 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 the improvements in the basis of your home if and when you sell. This will help keep your gain below the $250,000 ($500,000 if married filing jointly) that is exempt from being taxed when you sell your main home.
If you coach, umpire, or volunteer your services for your children's teams or activities, you may be able to claim a charitable contribution deduction. Your mileage to and from the volunteer activity is deductible at 14 cents per mile, and out-of-pocket expenses for supplies, equipment, and uniforms necessary to participate in the volunteer activities are also deductible as a charitable contribution. Keep those receipts and a mileage log for all your travel as a volunteer in youth organizations.
Are your children under age 13? And did you send them to a day camp while you and your spouse worked this year? If so, you may be able to include your expenses for the day camp as a child care expense and then claim the related credit. You are allowed a credit of between 20 and 35 percent of your expenses up to $3,000 for one child and $6,000 for two or more children when you file your income taxes. Make sure you get a receipt from the daycare provider(s) and the day camp.
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, are single and provide the main support of your household. This will qualify you for lower tax rates, higher credit amounts and potentially many other tax benefits.
Fatherhood is hard work that brings much personal reward, but sometimes the financial reward is less obvious. Ironic as it may seem, your tax return can be a place to pick up some of those financial benefits. Whether you are a new dad or an experienced dad, relax and enjoy your day. You've earned it!