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Ever feel like Uncle Sam forgets about the costs of raising a family? While tax season can be stressful, parents might qualify for valuable tax credits that directly reduce what they owe—or even boost their refund. Let’s unpack the key tax credits for families so you don’t leave money on the table.
What Is the Child Tax Credit and How Much Can I Claim?
The Child Tax Credit (CTC) is one of the most well-known tax benefits for families. For 2024, you can claim up to $2,000 per qualifying child under age 17. To qualify, your child must have a valid Social Security number, live with you for more than half the year, and meet relationship and dependent requirements. The credit phases out for higher-income households: starting at $200,000 for single filers and $400,000 for married couples filing jointly.
What’s the Child and Dependent Care Credit Worth?
If you paid for daycare, summer camp, or after-school care so you could work or look for work, the Child and Dependent Care Credit helps cover those costs. You can claim 20-35% of up to $3,000 in expenses for one child or $6,000 for two or more children. The percentage depends on your income, but even part-time workers may qualify. Unlike the CTC, this credit applies to children under 13 or dependents of any age who are physically or mentally unable to care for themselves.
Am I Eligible for the Earned Income Tax Credit (EITC)?
The Earned Income Tax Credit (EITC) rewards low- to moderate-income working parents, especially those with three or more kids. For 2024, the maximum credit is $7,830 for families with three children. Your eligibility and credit amount depend on income, filing status, and number of qualifying children. Even some workers without kids can claim a smaller version of the EITC, but parents often see the biggest boost.
Can Adoption Expenses Lower My Tax Bill?
Yes! The Adoption Credit covers qualified adoption fees, court costs, attorney fees, and travel expenses. For 2023, the maximum credit is $16,810 per child. It’s non-refundable, but it can reduce your tax bill dollar-for-dollar. The credit phases out for incomes above $292,150, so high-earning families may not qualify.
How Do Education Credits Work for College-Age Dependents?
If you’re paying college tuition or education expenses for a dependent, the American Opportunity Tax Credit (AOTC) offers up to $2,500 per student for the first four years of undergraduate studies. The Lifetime Learning Credit (LLC) provides up to $2,000 per tax return for graduate courses, job training, or part-time enrollment. You can’t claim both credits for the same student in the same year, so compare which gives you a bigger break.
What If My Child Has Special Needs?
Parents of children with disabilities may qualify for additional tax benefits. Medical expenses related to a child’s disability—like therapy, adaptive equipment, or specialized care—can be deducted if they exceed 7.5% of your adjusted gross income. Families might also be eligible for the Credit for the Elderly or Disabled if their child meets specific criteria outlined in IRS Publication 501.
How Do I Claim These Tax Credits?
Most credits require you to submit additional IRS forms. For example, the Child Tax Credit uses Form 8812, while the Child and Dependent Care Credit requires Form 2441. Keep detailed records of expenses, Social Security numbers for dependents, and income documents like W-2s or 1099s.
At People’s Tax Advisors, it is our goal to maximize your deductions and credits and get you the maximum refund possible. Visit us to set up your virtual appointment now!
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