Tax Exemptions for Children

The tax exemptions and tax deductions for children constitute certain tax deductions and rebates. These would reduce down your Adjusted Gross Income (AGI) and tax rebate for children can be availed in the coming future, for which you will get a check as a returned amount. In the following article, a quick and general elaboration on tax exemptions for parents of dependent children has been provided. Please note that the contents are quite generalized and brief in nature, and you will have to check their applicability and whether you qualify for them or not.

The Internal Revenue Service (IRS), has made several provisions for tax write offs for children, but at the same time you will need to consider the qualifying amounts and limits of the exemptions. Apart from that, while filling the Form 1040 and your income tax return, you will have to also choose from standard and itemized deductions. Some tax exemptions are not applicable for standardized deductions and hence, the best way to choose is to calculate and actually assess what would be more profitable for you.

General Deduction Rules

The most commonly availed exemptions for children is, personal exemption deduction of $3,700 as of 2011, for every child. If you are filing for 2010, then the amount is $3,650. This exemption is of course for the custodial parent, though there are some specified provisions wherein the deduction amount can be claimed by the non-custodial parent. Form 8332 for Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent will serve this purpose. This deduction or exemption is applicable for dependents who are not your biological children, but are your dependents, such as step-children, siblings or step-siblings, godchildren, etc. The basic qualifying condition is that the child must have lived, or is dependent on you for more than half the year, or more, and must be less than 19 years of age. Post 2007, the exemptions have been phased out, meaning that to get the deduction :

• Your adjusted gross income exceeds $278,900 and you are single, or
• You are married and filing jointly, then $357,100, or
• $318,000 in case if you are the head of household, or
• $178,550 in case if you are married yet filing separately.

Deductions for Educational Expenses

A specified deduction for educational expenses is available, irrespective of the fact whether you choose itemized deduction or a standardized deduction. This is a significant tax deductible item, as there is absolute freedom in availing it:

• The standard common deduction is $4,000 for tuition expenses. The exemptions are granted for higher education fees and enrollment fees.
• Another exemption for 2009 and 2010 is the American Opportunity and Lifetime Learning Credits, however it cannot be availed along with the standard $4,000 exemption.
• The American Opportunity and Lifetime Learning Credits of $2,500 can be availed for all four years of college.
• Lifetime Learning credit is another such scheme where a maximum credit of $2,000 can be claimed out of all deductible expenses for all years.
• The Education Savings Accounts (ESAs) is a scheme where $2,000 for every year can be contributed for kids under 18 years of age.
• Qualified student loan interest can have a deduction of not more than $2,500 annually.

Deductions for Medical Expenses

The medical expenditure of any kind, such as, preventive, cure and treatment of any sort can be deducted as medical expenses, and is a very important tax deduction for individuals. Such expenditures, however, have to be incurred due to an illness or disorder suffered by the child. The medical insurance claim also comes into the picture and certain refunded claims are considered against deductions (i.e.: the refunded amount does not become a part of the deduction amount). The only condition imposed is that the expenditure should not exceed 7.5% of your Adjusted Gross Income, and you need to itemize your deductions in order to claim deduction. It must be noted that certain non-essential and cosmetic procedures can be valid grounds for deductions.

Premiums of certain recognized medical and dental insurance policies and qualified long-term care expenses are treated as medical expenditures, on the fulfillment of certain terms and conditions. Since 2010, the deduction of premium also depends on one's age with the amount ranging from $330 to $4,110.

It is advisable to refer to an IRS tax deductions list while availing the tax exemptions for children, as there are several terms and conditions that come into the picture when you try to avail the deductions.