Your children may be your pride and joy, but the cost of raising them can quickly add up. Between housing, food and childcare/education, parents spend approximately $12,980 per child annually. And this is only through age 17. Expect to spend even more if you plan to send them to college. Fortunately, your dependents can potentially save you thousands of dollars at tax time. The easiest way to find out which tax breaks you qualify for is to do your taxes with ezTaxReturn.com. Here are some money-saving tax credits parents may be able to claim.
Child Tax Credit
For tax year 2021, the Child Tax Credit is worth up to $3,600 for each qualifying child aged 5 or younger and $3,000 per child aged 6 through 17. Most people already received half of their estimated credit as advance monthly payments between July and December. The other half you’ll get when you file your tax return. To receive the maximum credit, your modified adjusted gross income (MAGI) must be:
- $75,000 or less for single filers and married filing separate
- $112,500 or less for head of household
- $150,000 or less for married filing jointly
Credit for Other Dependents
Fifty-eight percent of adults ages 18 to 24 still live at home with their parents. If you have an older dependent who doesn’t qualify for the Child Tax Credit or Additional Child Tax Credit, you may be able to claim the Credit for Other Dependents. It is worth up to $500 per dependent. However, your credit may be reduced if your MAGI is more than $200,000 ($400,000 for married couples filing jointly).
Child and Dependent Care Credit
Parents who pay someone to watch their kids while they go to work may be eligible for the Child and Dependent Care Credit. Eligible taxpayers can deduct up to $8,000 of childcare expenses for one qualifying individual and $16,000 for two or more qualifying individuals. The maximum credit is worth 50% of your expenses. In other words, you may be able to receive $4,000 for one qualifying individual and $8,000 for two or more individuals. To qualify for the credit, your dependent must be a child aged 12 or younger, or a dependent of any age who is incapable of caring for themselves.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) was designed to help working families with low to moderate incomes. The maximum credit varies based on the number of dependents you have. Taxpayers with 3 or more children get the biggest piece of the pie, they can get up to $6,728. Those with 2 kids can receive up to $5,980, while those with only one child can get up to $3,618. Here is the adjusted gross income (AGI) limit for qualifying for the EITC.
|Children Claimed||Single, Head of Household, Widowed or Married Filing Separately||Married Filing Jointly|
|Three or more||$51,464||$57,414|
Your investment income must also be $10,000 or less. Use ezTaxReturn to claim the EITC and any other credits and deductions you deserve. It’s so easy you can prepare your federal and state returns in just 30 minutes.
American Opportunity Tax Credit
Being able to send your kids to college is part of the American dream, but it comes with a hefty price tag. For the 2021-22 school year, the average annual cost of tuition and fees at a private four-year university is $38,070. However, you can recoup some of the costs when you do your taxes. If you paid for tuition, books or supplies for your child, you may qualify for the American Opportunity Tax Credit. The maximum credit is $2,500 per student and 40% (up to $1,000) is refundable if you don’t owe any taxes. To be eligible, your child must be pursuing a degree, be enrolled at least part time during their first four years of college and have no felony drug convictions.
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is worth $2,000 per tax return and is available for students who paid for qualified tuition and related expenses. This can be undergraduate, graduate and professional degree courses at an eligible educational institution. The credit can be claimed for an unlimited number of years, but you can’t claim the LLC and AOTC for the same student in the same year.