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The IRS offers several tax credits to parents with minor children. Here are five of the most valuable you should know about. [[{“value”:”
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As a mother of two, I know kids can be expensive. But come tax time, they can also bring you some huge savings. Several tax breaks are specifically geared at children and families that can help you reduce your taxable income for the year or even reduce your tax bill directly.
But each one has its own requirements you must meet to claim them. Here are five of the most common you may qualify for this year.
1. Child Tax Credit
You get this tax credit for — you guessed it — having children. To qualify, your child must:
Have a valid Social Security numberBe under 17 at the end of the yearBe your biological, adopted, step- or foster child OR a full, half-, or stepsibling OR a descendant of one of theseHave been dependent on you for more than half their income during the tax yearHave lived with you for more than half the yearBe claimed as your dependent on your returnBe a U.S. citizen, U.S. national, or U.S. resident alien
The full credit is worth $2,000 per qualifying child. That’s a dollar-for-dollar reduction of your tax bill. However, those with incomes greater than $200,000 ($400,000 for joint filers) may get a smaller credit or may not qualify for this tax credit at all.
2. Child and Dependent Care Credit
This credit is available to parents who paid for daycare or other child care services throughout the year. You could also claim it if you’re caring for a spouse or parent who is unable to care for themselves.
You’re eligible for this credit if you paid for the expenses of a qualifying individual so you could work or look for work and you lived in the United States for more than half the year.
This credit covers up to 35% of child care expenses for a child under 13, with a maximum credit of $3,000 per child.
3. Adoption Credit
Those who adopted a child in 2023 can claim a tax credit worth up to $14,440 per eligible child. You can use this form to figure out how much your credit is worth.
Only adoptions of children younger than 18 qualify for this credit. And you can only write off qualifying expenses, like reasonable and necessary adoption fees, legal fees, and adoption-related travel expenses.
4. American Opportunity Tax Credit
This tax credit helps parents who are paying for their children’s higher education costs. To qualify, a child must:
Be pursuing a degree or recognized credentialBe enrolled at least half-time for one academic period during the yearNot have finished their first four years of higher education at the beginning of the tax yearNot have claimed this tax credit or the Hope Credit for more than four yearsNot have a felony drug conviction at the end of the tax year
There are also income limits that could reduce the maximum credit you qualify for. You may be ineligible for this credit if your modified adjusted gross income (MAGI) is over $90,000 or over $180,000 for joint filers.
The full credit is worth $2,500 per qualifying student. The IRS credits the first $2,000 you spend on qualified educational expenses at 100% and the next $2,000 at 25%.
5. Lifetime Learning Credit
This is another education-related credit. To qualify, you must have paid for qualifying higher education expenses at an eligible institution during the year for yourself, your spouse, or a dependent claimed on your tax return. The student must be enrolled for at least one academic period during the year.
This credit has the same income limits as the American Opportunity Tax Credit, so it’s not an option for high earners. It’s also worth noting that you cannot claim this credit and the American Opportunity Tax Credit for the same student in the same year.
The Lifetime Learning Credit is worth up to $2,000. You get a credit for 20% of what you spent on up to $10,000 of qualifying education expenses.
There might be other credits you qualify for as well. If you’re filing taxes on your own, your tax software should ask you questions to determine which you qualify for and it’ll guide you through filling out the appropriate forms. If you’re handing your taxes off to a professional, be sure to include proof of how much you spent on your child-related tax credits. And don’t hesitate to reach out if you have questions about which credits you qualify for.
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