Kids are lovable, but man are they expensive. According to the USDA, it costs around $233,610 to raise a child from birth to age 17. Then you have to send them to college and tuition is always rising. Fortunately, parents can find some relief at tax time. The IRS offers numerous tax credits which can shave thousands of dollars off your tax bill.
Child Tax Credit
Out of all the tax credits we’ll discuss today, the Child Tax Credit is probably the most popular. The credit is worth up to $2,000 per qualifying child. If the credit exceeds the amount of taxes you owe, then you can receive up to $1,400 per child as a refund. Your credit amount may be reduced if your modified adjusted gross income exceeds $200,000 ($400,000 for married couples filing jointly). To qualify, your dependent must be 16 years old or younger at the end of 2019. They must also be a U.S. citizen, U.S. national, or U.S. resident alien.
Credit for Other Dependents
Many adult children are moving out later and relying on their parents for financial support longer. If you have an older child you’re claiming as a dependent, you may be eligible for the Credit for Other Dependents. This nonrefundable credit is worth up to $500 per qualifying person. You can only claim the Credit for Other Dependents if your dependent isn’t eligible for the Child Tax Credit.
Child and Dependent Care Credit
Not everyone is fortunate enough to have loved ones nearby who can watch their kids while they go to work. If you pay someone to babysit while you earn a living, you may be able to recoup some of the costs. You can include expenses for preschool, before and after school care, and even day camps. To qualify, your child must be age 12 or younger. Parents can claim up to $3,000 of expenses for one child or $6,000 for two or more children. The Child and Dependent Care Credit is worth between 20 to 35 percent of your expenses depending on your adjusted gross income.
Earned Income Tax Credit
Let’s face facts, not everyone is earning a six-figure salary and that’s okay. The Earned Income Tax Credit (EITC) is available for all low to moderate income workers, but is most beneficial for taxpayers with kids. Parents can receive up to $6,557 depending on the number of children they claim on their return. To qualify, your earned income and adjusted gross income must be less than:
Your investment income also cannot exceed $3,600 for the year. Unfortunately, many taxpayers miss out on the EITC because either they’re unaware that the credit exists, or they simply don’t know how to claim it. The best solution is to use ezTaxReturn.com to do your taxes. You’ll get every tax break you’re entitled to and receive the biggest possible refund, guaranteed.
American Opportunity Tax Credit
Have a kid in college? If you’re paying for their education expenses such as tuition, books and fees, you may be able to claim the American Opportunity Tax Credit (AOTC). You can receive a maximum credit of $2,500 per student. If the amount of taxes you owe is reduced to zero, you can receive up to $1,000 of the remaining credit as a refund. The credit amount begins to phase out once your modified adjusted gross income exceeds $80,000 ($160,000 for married filing jointly). To qualify for the AOTC, your child must be in their first four years of higher education at an eligible institution.
Lifetime Learning Credit
If you pay for your dependent to take undergraduate, graduate or professional degree courses, you may be able to claim the Lifetime Learning Credit. It is worth up to $2,000 per tax return. Qualified students must be enrolled in an eligible institution for at least one academic period. Additionally, your modified adjusted gross income must be less than $67,000 ($134,000 for joint filers).