The information in this article is up to date for tax year 2023 (returns filed in 2024).
Even though their love has no price tag, kids can get expensive! Between housing, food, and childcare/education, the cost of raising a child is between $15,000 and $17,000 annually. Yikes! 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. Here are some money-saving tax credits for parents.
Find out which tax breaks you qualify for with ezTaxReturn.
Child Tax Credit
For tax year 2023, the Child Tax Credit is worth up to $2,000 for each qualifying child or dependent under age 17. To receive the maximum credit, your modified adjusted gross income (MAGI) must be:
- $200,000 or less for single filers and married filing separate
- $200,000 or less for head of household
- $400,000 or less for married filing jointly
If your income exceeds these amounts, your credit will be reduced by $50 for each $1,000 of income exceeding the limit amount until it reaches zero. The Child Tax Credit is considered a partially refundable credit, which means it can reduce the amount of taxes owed. For any amount remaining, you can receive a refund of up to $1,600, which is known as the “additional child tax credit”.
| Update: Congress is trying to pass a bill called the “Tax Relief for American Families and Workers Act of 2024” which would increase the refundable portion of the Child Tax Credit. For tax year 2023, the refundable amount would increase to $1,800. It then jumps to $1,900 for tax year 2024 and $2,000 in tax year 2025. If the bill passes, the IRS says they will automatically issue you the funds within 6 to 12 weeks. You won’t need to amend your return or take any additional steps. |
Please note, that a tax credit decreases your tax bill. For example, if you owe $4,000 and you are able to receive a $2,000 tax credit, your tax bill will decrease to $2,000. As opposed to a tax deduction which decreases your taxable income.
For the 2023 Child Tax Credit, your dependent must meet the following criteria:
- Be under age 17 at the end of 2023
- Be your biological child, stepchild, eligible foster child, sibling, half-sibling, or descendant of one of them (e.g., a grandchild)
- Have lived with you for more than half the year
- Be properly claimed as your dependent on the tax return
- Provide no more than half of their own financial support during the year
- Be a U.S. citizen, resident alien, or U.S. national
- Not file a joint return with their spouse for 2023 or file it only to claim a refund of withheld income tax or estimated tax paid
To claim the credit, fill out Form 1040 or 1040-SR and attach a Schedule 8812 (Credits for Qualifying Children and Other Dependents) to calculate the amount of the credit and any additional child tax credit.
Our ezTaxReturn software provides simple step-by-step guidance for claiming the child tax credit! You may even be qualified for a FREE federal return. Find out if you qualify.
Credit for Other Dependents
An increasing number of young adults are still living at home. This is not surprising, with many facing major debt and an ongoing global pandemic in a tough economy and housing market.
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 qualifying dependent. However, your credit may be reduced if your MAGI is more than $200,000 ($400,000 for married couples filing jointly).
The credit can be claimed for:
- Dependents of any age, including adults
- Dependent parents or other qualifying relatives
- Unrelated dependents living with the taxpayer
Note: You cannot use the Credit for Other Dependents if you claim the Child Tax Credit or Additional Child Tax Credit.
Child and Dependent Care Credit
Childcare is one of the most expensive costs associated with raising a child. Thankfully, you may be able to get some of that money back come tax time.
Parents who pay someone to watch their kids (age 12 or under) while they go to work may be eligible for the Child and Dependent Care Credit. For 2023, eligible taxpayers can claim up to $3,000 of childcare expenses for one qualifying individual and $6,000 for two or more qualifying individuals.
The maximum credit is worth 35% of the related expenses. This is determined by your income and the amount of related expenses necessary for the care of your dependent. 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 and lives with you for longer than half a year.
Earned Income Tax Credit
If you didn’t make a lot of money in 2023, you may be eligible for the Earned Income Tax Credit (EITC). You must meet the thresholds for the adjusted gross income (AGI) to qualify. See the IRS EITC tables by year here.
The maximum credit varies based on the number of dependents you have:
- No qualifying children: $600
- 1 qualifying child: $3,995
- 2 qualifying children: $6,604
- 3 or more qualifying children: $7,430
Here is the 2023 adjusted gross income (AGI) limit for the EITC:
| Children Claimed | Single, Head of Household, Widowed or Married Filing Separately | Married Filing Jointly |
| Zero | $17,640 | $24,210 |
| One | $46,560 | $53,120 |
| Two | $52,918 | $59,478 |
| Three or more | $56,838 | $63,398 |
Your investment income must also be $11,000 or less.
Use ezTaxReturn to claim the EITC and any other credits and deductions you deserve. It’s fast and ez to file your federal and state returns.
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 2022-2023 school year, the average annual cost of tuition and fees at a private four-year university is $42,162. Public out-of-state tuition is over $23,000 in costs annually.
However, you can recoup some of these 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 for the first four years of college.
You may be eligible for up to $2,500 for each qualified student in your household. This credit is partially refundable, so that means if it brings your tax bill down to zero, then you can receive 40% of any remaining credit amount refunded to you (up to $1,000). 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 expenses. These expenses include tuition, school supplies, and enrollment fees. Undergraduates, graduates, and those taking professional degree courses at a qualifying educational institution are eligible. The credit can be claimed for an unlimited number of years.
Put more money back in your pocket this tax season with ezTaxReturn. Start your return today to get the biggest refund–guaranteed.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
