Tax credits apart from dependency exemptions
If the dependent meets all these rules, then all you need to do is furnish the dependent’s social security number, and you are qualified for another exemption.
Tax Credits: In addition to the personal dependency exemption, there are certain tax credits that may apply to you after your children are born. For instance, you are entitled to Child Tax Credit and Child and Dependent Care Credit. Tax credits are a real advantage because they literally cut the amount of tax you pay on a dollar-for-dollar basis. In cases where the child is adopted, it is even possible for the foster parents to assert tax credits on their income tax for legal adoption expenditure.
Income shifting: Since children fall in a lower tax bracket, it is also possible to save on tax money by transferring funds from the parents to the children. However, care should be taken while doing this. For instance, putting a grown-up’s investment in a child’s name is not permissible.
