No one works harder than mom to keep the family happy. This Mother’s Day, we celebrate all the hardworking moms and moms-to-be with a list of handy tax-related benefits, along with some commonly overlooked tips, that come with being a mom:
- Newborn medical expenses – Is this your first Mother’s Day? If your child was born in 2018, you may be able to deduct the medical expenses you paid (anything since January 2018). Eligible expenses include the costs for the birth of your child, as well medical check-ups for babies and parents. Tax reform allows for a potentially larger medical deduction, since you only have to subtract 7.5%, instead of 10%, of your Adjusted Gross Income (AGI) from your total medical expenses.
- New children mean new credits – There is no better tax benefit than having a new child on your tax return. Due to tax reform, you are no longer able to claim an exemption amount for the child as a new dependent, but you can claim various child-related tax credits. These credits include the increased 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 $55,000.
- Adopting a child – Tax reform didn’t affect the Adoption Credit, so if you adopted a child that was not related to you or your spouse in 2018, you may be eligible for a credit of up to $13,840 per child. And if your child(ren) were considered special needs by your local Department of Family Services, you are eligible for the full credit amount for each child you adopt.
- Educating your child – For new moms, the Coverdall Education Savings Account or Qualified Tuition Program (also referred to as a 529 Plan) are great options to pay for future education expenses. Both the Coverdall ESA and 529 Plan can be used for K-12 as well as college and university. With the Coverdall ESA, you can contribute up to $2,000 per year if you modified AGI is less than $110,000 ($220,000 married filing jointly) and the funds must be used by age 30. For both plans, distributions are tax free when used for qualified education expenses.
- Educating yourself – Your kids are in school all day and you’ve gone back to school. If you paid expenses related to college, graduate or vocational school you may be able to claim the Lifetime Learning Credit. This is a non-refundable credit of up to $2,000 of qualified tuition, fees, and expenses you paid for yourself, spouse, or a dependent. You do not have to be in a degree program, a full-time student, or in the first four years of post-secondary education; your modified AGI cannot be more than $67,000 for singles or $134,000 for married couples filing a joint return.
- Selling your home – Whether your family has grown or you find yourself in an empty nest, it’s time 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 is 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 still deduct your real estate and personal property taxes, as well as either state and local income taxes, or sales taxes. However, tax reform does limit your total deduction to $10,000 in taxes. Taxpayers who live in high income tax or real estate tax areas could see a reduction in their total itemized deductions.
- Volunteering – If you volunteer your services for your children’s teams or activities – for example, coaching the cheerleading squad or softball team – 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 necessary supplies, 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 while you and your spouse worked, this year? If so, you may be able to include your expenses for the day camp as a childcare 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.
- Remember your filing status – If you are a single mom, 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 for your household. This will qualify you for lower tax rates, higher credit amounts, and potentially, many other tax benefits.
We know motherhood involves a lot of sacrifice and hard work, but nothing beats the personal rewards. You should enjoy the financial benefits that come with being a mom. Whether you’re a new mom, seasoned pro or empty nester, you deserve you deserve a break (and maybe flowers and breakfast in bed).
Happy Mother’s Day, moms – you’ve earned it!