Jackson Hewitt® Tax Tip: Vital Information on Available Tax Benefits for Taxpayers With Children

PARSIPPANY, N.J., March 21, 2011 /PRNewswire/ -- While there are many surprises that come with raising children, parents shouldn't be caught off-guard about child-related tax credits and deductions. According to Jackson Hewitt Tax Service®, parents should learn about both new and long-standing tax considerations that could help them receive a larger tax refund.

"There are numerous tax laws that relate to dependent children of every age, from adoption credits to education deductions for an older child in college," said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. "Tax benefits related to children are plentiful and change often, so it is important to learn about new or revised rules that will affect those credits and deductions for which you may qualify."  

Steber highlights key questions parents should ask when filing their taxes this year:

• Who is considered a child for tax purposes?
  • The uniform definition of a child establishes that, for tax purposes, a child is the natural child, stepchild, adopted child or eligible foster child of a taxpayer.  An adopted child is one who has been legally adopted, or a child who has been lawfully placed by an authorized placement agency for legal adoption. An eligible foster child is one who has been placed by an authorized agency or by a judgment, decree or other order of any court of competent jurisdiction.  Also, the child must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.

• Are there any education credits or benefits for dependents?
  • Parents who are paying a child's qualified tuition and related higher education expenses may be able to take advantage of the American Opportunity Tax Credit, which requires the student to be enrolled at least half-time in one of the first four years of post-secondary education.  If the student doesn't meet the requirements for the American Opportunity Credit they may be able to claim the Lifetime Learning Credit, which is a nonrefundable tax credit with a dollar limit per family that is available for qualified tuition and related expenses of higher education, whether the student is at the undergraduate or graduate level. A taxpayer cannot claim both a Lifetime Learning Credit and American Opportunity Tax Credit for the same student in the same year.

• How does the Earned Income Tax Credit apply to working parents and families?
  • The Earned Income Tax Credit or "EITC" is a refundable credit available to eligible individuals with low to moderate "earned income" resulting from wages, tips, salary, and income from self-employment. For the 2010 tax year, the maximum credit amounts are:
    • $5,666 with three or more qualifying children
    • $5,036 with two qualifying children
    • $3,050 with one qualifying child
    • $457 with no qualifying children

• What is the Child Tax Credit?
  • The Child Tax Credit is a nonrefundable credit that provides up to $1,000 for each qualifying child under age 17 at the end of the year. Generally a child qualifies if they are a U.S. citizen or national (or a U.S. resident for some part of the year), lived with the taxpayer for more than half of the year, did not provide more than half of their own support and is claimed as a dependent.

• What is the Additional Child Tax Credit?
  • Taxpayers who were unable to use all of their Child Tax Credit may be eligible to claim the refundable Additional Child Tax Credit. The credit is equal to the smaller of the remaining Child Tax Credit (after the taxpayer's taxes have been reduced to zero) or 15 percent of their earned income over $3,000.

• Are there any credits for adopting a child?
  • Those who adopt a child and pay adoption expenses may be eligible for a refundable credit of up to $13,170 in expenses per child.  If the taxpayer's modified adjusted gross income is more than $182,520, the credit begins to be phased out; the credit is not available to those with a modified adjusted gross income of $222,520 or more.

About Jackson Hewitt Tax Service Inc.

Based in Parsippany, N.J., Jackson Hewitt Tax Service Inc. (NYSE: JTX) is an industry-leading provider of full service individual federal and state income tax preparation, with franchised and company-owned office locations throughout the United States.  Jackson Hewitt Tax Service® also offers an online tax preparation product at www.jacksonhewittonline.com.  For more information, or to locate the Jackson Hewitt® office nearest to you, visit www.jacksonhewitt.com or call 1-800-234-1040.  Jackson Hewitt can also be found on Facebook and Twitter.

SOURCE Jackson Hewitt Tax Service Inc.