Income Tax Issues for Families

In this article:
Childcare and Education Deductions
Coverdell Account ESAs
FSA Tips
Tax Outlook Improved for Families
Unsolicited Advice

Tax preparation can be particularly stressful for busy parents. Here's some professional advice to guide you through the reams of information on taxes.

If you're an organized person, you've probably spent some time this month checking your files and getting ready to submit your tax return. Given today's complex tax code, it's hard to know if you're really taking advantage of every rule that you can use to save as much as you can. But why should you miss out just because you don't have a professional preparer or don't have the time to sift through reams of advice on the Internet to find those tips that pertain to your financial situation?

Childcare and Education Deductions

Eva Rosenberg, MBA, EA, also known as Tax Mama (www.taxmama.com), offered timely advice about costs associated with your children. "Remember that . . . you can deduct education costs on the front of the tax return, even if you don't itemize," she said. Rosenburg adds that if you're still paying for childcare, be sure to collect your provider's name, address, and social security number or federal identification number. "It wouldn't hurt if you also included his or her phone number on that same piece of paper. You never know when some tax agency wants that, too," she says.

Patricia Smalls, of Personal Accounting Total Services in New York City suggests that careful planning for your child's education will offer you a tax break down the line as well.

Coverdell Account ESAs

"For instance, a Coverdell Account ESA, which is a trust or custodial savings account created only for the purpose of paying qualified education expenses of the designated beneficiary, allows you to contribute up to $2,000 a year for your child's education, tax free. Qualified educational expenses include tuition, fees, books, supplies, internet access and equipment, and the costs of room and board. Then distributions are tax free if they are not more than the child's adjusted qualified education expenses for the year," she says.

She also notes that the Coverdell can be used not only to pay for college, but elementary and high school as well.