The IRS offers child tax credits to help parents and guardians offset some of the costs of raising a family. If you have a dependent who isn’t your direct child, you may also be eligible to claim a credit.
Parents may seek tax breaks on everything from child care to educational costs and even supplies, in some cases. Here are 6 ways you can take advantage of tax benefits as a parent:
The Child Tax Credit is a significant tax credit for those with qualified dependent children under age 17 (more on qualifications in a bit). With tax reform, the Child Tax Credit was increased to $2,000 per qualifying child and will be refundable up to $1,400, subject to income phaseouts.
Summer Camps and Child care
According to Care.com ,one in three families now spend 20% or more of their annual household income on child care. If you paid a daycare center, babysitter, summer camp, or other care provider to care for a qualifying child under age 13 or a disabled dependent of any age, you may qualify for a tax credit of up to 35 percent of qualifying expenses of $3,000 for one child or dependent, or up to $6,000 for two or more children or dependents.
Qualified tuition plans, or 529 plans
These plans offer yet another way to save on taxes while providing for your child’s education. A 529 plan is not a deduction or a credit. It’s a shelter. The state-by-state 529 plans authorized by the Internal Revenue Service allow you to invest and earn interest on the funds without subjecting you to federal income taxes.
Student loan interest deduction
Parents can deduct interest payments on certain student loans. The deduction can reduce the amount of taxable income, and possibly lower your tax bill. For example, you can reduce your taxable income up to $2,500.
Adoption Tax Credit
The adoption tax credit can offset the costs of adopting a child. Income limits apply, and you can only claim a certain dollar amount per adoptive child. Some of the expenses that may qualify for this credit include court and attorney fees and related travel and meal expenses.
Earned Income Tax Credit
Depending on the number of children in a household, and the amount of household income, the earned income tax credit can provide up to $6,431 in tax deductions.
Do you feel you are using all of the deductions and credits to which you are entitled? Are you keep track of all invoices and checks paid out to child care and summer camps? For more guidance and how to maximize your tax benefits as a parent, contact our office today.