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By Transamerica / Feb 11, 2015

5 Tax Advantages You’ll Love this Valentine’s Day

valentines_day_taxes This Valentine’s Day, learn how you can maximize your tax benefits by deducting expenses related to loved ones, taking a tax credit or changing how you file taxes. Both tax deductions and credits can benefit your overall tax situation. However, a tax deduction lowers your overall taxable income, while a tax credit directly lowers the amount of taxes you owe. Married couples and families often use deductions and credits to their advantage to save more money.

Below, please find some tax privileges for working professionals and their loved ones.

  1. Marriage bonus: If you recently got married, congratulations! You may receive a tax benefit if filing jointly, especially if one spouse makes significantly less money than the other spouse, pulling the high-earner into a lower tax bracket. This is called the marriage bonus because you are paying less taxes filing jointly than you were as a single filer. To see how being married may affect your taxes, work with your spouse to figure out your tax rate when filing jointly versus filing separately. Choose the filing status that will benefit you the most. There are many online tax calculators that may help. Keep in mind that not everyone receives a marriage bonus. Some people are moved into a higher tax bracket after getting married and as a result, have to pay more taxes.
  1. Increased IRA contributions: If filing jointly, a non-working spouse can still contribute to an IRA in their own name, if the working spouse has enough income to support it. Since you can deduct IRA contributions, this means that you can deduct a larger amount of money from your and your spouse’s taxable income. The 2015 IRA contribution limit for people under 50 is $5,500. People over 50 can contribute an additional $1,000. 
  1. Exemptions for dependents: If you have dependents you can claim on your tax forms, you can deduct even more money. In 2014, you can claim $3,950 per qualified child, including stepchildren and grandchildren. Keep in mind that to get this exemption, the child must live with you for more than half the year and be younger than 19 or be a full-time student who is younger than 24. For people with multiple children, this adds up quickly! If you financially support a relative or have them live with you, you may be able to deduct $3,950 per person. However, keep in mind that no one else can claim that person as a dependent on his or her tax forms.
  1. Child and Dependent Care Credit: Having children is expensive, especially if you have to pay for childcare. The IRS recognizes this and grants a tax credit called the Child and Dependent Care Credit to working parents with children ages 13 and under who are in childcare. With one child, you can deduct up to $3,000 per year. If you have two or more children, you can deduct up to $6,000. The deduction limit combined with your income determines the overall credit amount. Keep in mind that this credit also applies to day camp.
  1. Additional credits for parents: There are more credits that affect parents. The Child Tax Credit can reduce your tax bill by as much as $1,000 per child under the age of 17, if you meet the requirements. The Earned Income Tax Credit (EITC) is geared towards low to moderate-income families. Your salary and number of children determine the amount of money you are credited. In 2014, the maximum EITC amount available is $3,304 for taxpayers filing jointly with one child; $5,460 for two children; $6,143 for three or more children and $496 for no children.

This Valentine’s Day, you may have even more of a reason to appreciate your loved ones. Talk to a financial professional to find out how to leverage as many tax advantages possible, especially those that come with being married or being a parent.

The information contained in this article/seminar is intended solely to provide general summary information and is not intended to serve as legal or tax advice applicable to certain matters or situations. For legal or tax advice concerning your situation, please consult your attorney or professional tax advisor. Although care has been taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it.