This post is the eigth in a series of 10 that covers each point of the MSN Money top 10 mistakes and hopefully will elaborate and add a little new parent thinking to the equation.
Money Mistake 8:
Overlooking tax benefits for parents
As your spending skyrockets, at least you can take some solace in a few tax breaks geared for parents.
The two biggest? The $1000 tax credit which is excellent as it reduces your tax bill by $1000. As opposed to a Tax deduction which only reduces the taxable income. The other is really two different ones, but you can only claim one of the two. There is the child-care tax credit and the Flexible Child Care spending accounts. The Flex account is an employer sponsored account, so check to see if your employer has one. If not, then your choice is obvious. If they do? Well, your choice is not as obvious, but you’re probably better off with the Flex account. The money that you put into it is pre-tax so it can amount to quite the savings. Obviously, my wife and I will be claiming the $1000 tax credit, but have not decided on te flex account yet. My employer does offer one, but we are waiting to see the cost basis on the child care to make a final decision.
Part 7: Overspending your baby costs
Part 9: Saving in a child’s name