Taxes

7 Tax Credits and Deductions Parents Need to Know

Products You May Like

Updated for tax year 2024.

Your little bundle of joy may tap into your pocketbook throughout the year, but at tax time they can actually help you save money. And the more children you have, the bigger your tax savings.

Uncle Sam offers many tax benefits for families, but understanding which ones you qualify for can be as tricky as deciphering your kids’ math homework. Filing status, itemized deductions, and income levels all come into play.

Whether you’re doing your own taxes or using a professional, it’s helpful to know which tax breaks are available to you — if you don’t qualify for them this year, keep in mind that you may in the future!

Here are several popular tax credits and deductions for families you may be able to claim this year:

1. Earned Income Tax Credit

Every year, millions of taxpayers don’t claim the Earned Income Tax Credit (EITC) even though they qualify for it.

If your family earns less than $66,819 in 2024, you may be able to receive this credit, which could be worth up to $7,830 based on your income level and the number of qualifying children you have. The credit first reduces the amount of taxes you owe and then any remaining balance is given as a tax .

2. Child & Dependent Care Credit

If you pay for the care of children under 13 years of age so you (and your spouse) can work, search for a job, or attend school, you may be eligible for the Child & Dependent Care Credit.

This credit covers various types of care, such as nursery school, pre-school, before and after school care, day camps (excluding overnight camps), and in-home nanny care.

The value of the tax credit depends on your adjusted gross income and can be up to 35 percent of your expenses. You can receive up to $3,000 for one dependent or $6,000 for two or more dependents. However, the credit amount is reduced as your income levels increase.

3. Child Tax Credit

The Child Tax Credit is worth up to $2,000 per qualifying child if your 2024 modified adjusted gross income (MAGI) is less than $400,000 for those married filing joint returns or $200,000 for all other filing statuses.

If you receive less than the full amount because the credit eliminates your tax bill, you may qualify for the refundable portion of the credit called the Additional Child Tax Credit, which is worth up to $1,700 in 2024 (up from $1,600 in 2023).

4. Medical and dental expenses

If your family’s unreimbursed medical and dental expenses in 2023 exceed 7.5% of your AGI, you can claim the amount above 7.5% as an itemized deduction. In 2024, the threshold increases to 10% for most taxpayers (except for those 65 and older, which remains at 7.5%).

Expenses must be for the diagnosis, cure, mitigation, treatment, or prevention of disease or treatment. Premiums for medical, dental, and some long-term care insurance, as well as transportation costs essential to medical care may also qualify. Only prescription medication and insulin are eligible expenses; over-the-counter drugs don’t generally qualify for medical expenses.

5. Adoption Credit

The Adoption Credit will cover up to $16,810 in adoption expenses for 2024 (up from $15,950 in 2023), depending on your modified adjusted gross income (MAGI). You can claim the full credit if your MAGI is less than $252,150 in 2024. The credit amount begins reducing after this, and if your MAGI is over $292,150, you will not be able to claim the credit.

Qualified adoption expenses include court costs, adoption agency fees, attorney fees, and travel expenses (including meals). The credit is non-refundable for 2024, which means it is limited to your tax liability for the year. 

6. Qualified tuition programs and Coverdell education savings accounts

If you intend to start a fund for your child, some education savings plans like qualified tuition programs (also called 529 plans) and Coverdell education savings accounts offer tax benefits as well. A portion of distributions and earnings from these kinds of accounts are generally tax-free as long as they are used for qualified education expenses.

7. Student loan interest deduction

Do you have a child bound for college? If you’re claiming your kids as dependents and dealing with the hefty price tag of higher education, there’s good news. You might qualify for the student loan interest deduction, American Opportunity Credit, or Lifetime Learning Credit, which can all help offset the cost of higher education expenses.

The bottom line

Having a growing family definitely comes with some tax perks. But if you’re overwhelmed with all the possibilities right now, remember TaxAct® has your back. We’re here to help you determine what deductions and credits you may qualify for so you can keep more of your hard-earned money right where it belongs — in your family’s hands.

This article is for informational purposes only and not legal or financial advice.
All offers, products and services are subject to applicable terms and conditions.

More to explore:

Products You May Like

Articles You May Like

IRS free tax filing will be available in 24 states for the 2025 season — here’s who can use it
Brazil Proposes Major Overhaul of Its Alcohol Tax System
CNBC’s No. 1 financial advisor has a golden rule: ‘We do not time the market’
Buffer ETFs can shield investors from some losses. Here’s what to know before investing
HSBC exec says there’s a lot of AI ‘success theater’ happening in finance

Leave a Reply

Your email address will not be published. Required fields are marked *