For practical, cultural, and personal reasons, more families are living in multigenerational homes. Multigenerational homes are households where three or more generations under one roof. According to 2020 Census data, there were 6 million multigenerational homes in the U.S. in 2020.
While having the whole family under one roof can sometimes be crazy, the benefits usually outweigh the chaos. When you file your taxes for 2023 next year, you may discover that there are some significant family-related tax benefits you can take advantage of. Make sure you get the tax deductions and credits you’re eligible for when you sit down to file your taxes.
Making a House a Home
Do you own a house or did you buy a home last year? If so, check to see if you’re eligible for some tax deductions.
- Points: If you have paid points (sometimes called origination fees) to get a specific rate from your lender, you can deduct them from your taxes. If you paid points when you purchased your home, you can deduct your points in the year you paid them. If you refinanced your home, you have to deduct the points over the life of the loan.
- Interest: If you purchased a home and have a home loan, you most likely paid mortgage interest. You can deduct the mortgage interest paid during the tax year reported on Form 1098.
- Property Taxes: Property taxes can be really expensive, but if you paid them, you can deduct them on your taxes. For the tax year 2023, your property taxes and state income tax withholding or sales and local income tax cannot be more than $10,000 ($5,000 if you’re married, but filing separately) in total.
Cherish Your Children and Family
There are several tax benefits that you can use as a parent when filing your tax return.
- If your child (under age 13) was in daycare or after school care last year, you may use Child and Dependent Care Credit. For the tax year 2023, the Child and Dependent Care Credit is worth up to 35% of $3,000 for one child and up to 35% of $6,000 for two or more qualifying dependents.
- The Earned Income Tax Credit can be a huge credit for working parents. A family with three kids may be able to claim a credit up to $7,430 for 2023. The Earned Income Tax Credit is the country’s largest program for working people. Roughly 31 million workers and families received federal Earned Income Tax Credit last tax season, and the average Earned Income Tax Credit was $2,043 per filer.
- Although the dependent exemption was eliminated under tax reform, you can claim up to $2,000 per qualifying dependent child under age 17 with the Child Tax Credit. If your kids are 18 or over, you may be able to claim the credit for non-child dependents of $500.
- If your kids are in college and are dependents, look into the American Opportunity Tax Credit (AOTC). This is a refundable tax credit up to $2,500 per student for the first four years of college.
- If they don’t qualify for the AOTC, then check out Lifetime Learning Credit. This tax credit is up to $2,000 per tax return and can be claimed even if your dependent only takes one class in college.
You should also set aside a few minutes to check with your Human Resources department to make sure you’ve filled out your W-4 correctly and are having the proper amount withheld from your paycheck especially if you had any changes in income, have more dependents, or purchased a home. You can use TurboTax W-4 withholding calculator to help you easily figure out how much you should be withholding.
Looking Out for Grandparents
Did you provide financial support for your parents or grandparents? If so, then you may be able to claim them as dependents on your taxes. In general, to be considered a qualified relative:
- You must have provided more than half their support
- Their taxable income for 2023 must be less than $4,700
If your parents or grandparents can be claimed as a dependent, then you may still be able to claim the Other Dependent Credit of $500 for non-child dependents.
Thoughts on Family and Finances
No matter your family arrangement, make sure you’re getting the most financially by claiming the tax deductions and credits you deserve. The money you save can be used to take care of your loved ones!
Don’t worry about knowing these tax rules. Meet with a TurboTax Full Service expert who can prepare, sign and file your taxes, so you can be 100% confident your taxes are done right. Start TurboTax Live Full Service today, in English or Spanish, and get your taxes done and off your mind.
2 responses to “Multigenerational Families: Top Family Tax Deductions and Credits You Should Not Miss”
