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I am a homeschooling mother and Certified Public Accountant (CPA) combining my experience and knowledge to help homeschool organizations such as co-ops, support groups, music and sports programs. HomeschoolCPA answers questions from homeschool leaders on many topics such as nonprofit status, liability, paying teachers, tax exempt status and taxes.
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2:57 PM, May. 24, 2006
Increased taxes on teenagers
(view similar articles on Personal Finance and Taxes)
President Bush signed a new tax law, while mostly for the good of families, increases tax on teenagers with college savings. And it is retroactive to January 1, 2006! Aaarrgh, I hate it when Congress changes tax law with no opportunity to plan ahead for the tax impact.  I guess teenagers who save for college are too small a minority to make much of a fuss and they don't vote!
Here's a link from TaxProf blog:
http://taxprof.typepad.com/taxprof_blog/2006/05/ny_times_despit.html
And another from the Wall Street Journal:
Teen Angst: How the New Tax Law
Could Hurt Your College-Savings Plan
by Jonathan Clements
May 17, 2006; Wall Street Journal
Washington has slapped a tax increase on teenage investors -- and messed up my college-savings strategy. (mine too, Mr. Clements!)
The new tax bill, which President Bush plans to sign into law today, imposes the so-called kiddie tax on children below age 18. Under the old law, only children under 14 were hit with the tax.
Result: If you are like me and you funded custodial accounts to pay for your children's college education, you could face an extra tax bite and some nasty accounting hassles. Here's why most parents should now steer clear of custodial accounts -- and what you might want to buy instead. http://online.wsj.com/article/SB114782089869254718.html?mod=Getting+Going+Sunday
Carol
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For leaving your adoptin tax credit comment over at Adoption Options. It is a wonderful tip that I'm sure many parents don't know about.
Thank you for reading, and if you hear of any other adoption credit helps, let us know!
Abiding in the Vine!
Posted by sagerats on Jun. 3, 2006 at 11:39 AM
For those of you who are wondering what adoption has to do with the Kiddie Tax, I posted a comment on how I helped a tax client get their adoption credit cash early instead of waiting for a refund. I did some planning and calculated that they could have NO federal income tax withheld from the husband's paycheck! The adoption credit meant that they owed no federal income tax. This put more cash in their bank account every month as they were paying final adoption expenses. It really helped a lot. If you are adopting, I suggest you consult with an accountant to plan for the adoption tax credit.
Carol
Posted by HomeschoolCPA on Jun. 3, 2006 at 8:42 PM
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Thank you!
