Taxes are tough enough to deal with on their own. When you add kiddos to that, it gets increasingly complicated.
Parents are always searching for ways to improve their finances (children are kind of expensive), and overlooked tax breaks can be an easy win.
Taking advantage of available credits and deductions can help you keep more money in your pocket. Here are a few key tax benefits that could lower your tax bill this season.
Child Tax Credit
This is a big’un.
The Child Tax Credit is likely the first tax break that comes to mind for parents. Thanks to the Tax Cuts and Jobs Act of 2017, the credit was doubled to $2,000 per qualifying child.
A portion of this credit is refundable, meaning you could receive a refund if you meet the criteria. The Tax Cuts and Jobs Act also expanded eligibility for more families.
Tax credits are more valuable than deductions, as they directly reduce your tax bill dollar for dollar, whereas tax deductions only lower the taxable income amount.
Child and Dependent Care Tax Credit
If you paid for childcare or care for another household member while you worked, you may be eligible for the Child and Dependent Care Tax Credit.
You can claim up to 35% of these expenses, within specific limits, with the credit amount potentially varying depending on your income. Services from babysitters, daycare centers, and day camps may qualify.
Medical and Dental
You may be able to deduct certain medical and dental expenses for your family. If unreimbursed healthcare costs exceed 7.5% of your adjusted gross income, you can deduct the amount above that threshold as an itemized expense.
These expenses must meet specific criteria, like being related to disease prevention, diagnosis, or treatment. Consult your tax professional to determine if you qualify.
EIC — Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is designed for low- and moderate-income working families. You can receive a credit based on a percentage of your earnings, with the maximum amount varying depending on your family size.
If your family earned under $66,819 in 2024 and you’re filing jointly, you may be eligible for a credit of up to $7,830 if you have three or more qualifying children.
529’s
Qualified tuition plans, or 529 plans, allow you to save on taxes while putting money away for your children’s education.
These state-specific plans, approved by the IRS, let you invest or earn interest on the funds without federal income tax. Additionally, your state may offer its own tax benefits related to 529 plans.
Tax credits for education
Parents who help cover their kids’ education costs might qualify for one of two education tax credits.
The American Opportunity Tax Credit can provide up to $2,500 per year for tuition and fees during the first four years of college, with eligibility based on income.
Alternatively, the Lifetime Learning Credit offers up to $2,000 per tax return for undergraduate, graduate, and professional courses, including those that enhance job skills.
Note: You can’t claim both credits for the same student in the same year.
