4 Tax Credits For Parents With Children

By Michael Diaz. May 7th 2016

Did you know that raising children can result is significant tax benefits to parents? If not, then you need to get up to speed on the numerous tax credits and deductions that parents can take advantage of when tax season rolls around. These four tax benefits can end up saving you thousands of dollars on your tax bill.

Child Tax Credit

The child tax credit allows you to take up to $1,000 off of your annual tax bill for each qualifying child that you have. Note that this credit is not refundable so you cannot get a check from Uncle Sam if the credit is larger than your tax bill. A qualifying child must meet all of the following requirements:

  • Be your child, stepchild, foster child, sibling, stepsibling or descendent of any one of the previous options.
  • Be under 17 years of age by the end of the tax year.
  • Did not provide over half of their own support for the tax year (meaning the child did not earn a meaningful annual income).
  • Have lived with you for over half of the tax year (If the child was born or died in the middle of the year, it is considered to have lived with you for the full year if your home was the child’s home during the entire time it was alive).
  • Is claimed as a dependent on your tax return.
  • Does not file a joint tax return for the tax year.
  • Is a legal US citizen, national or resident alien.

Additionally, you cannot take the full credit if your adjusted gross income is above $110,000 for married couples filing jointly, $75,000 for those people filing as single, head of household or qualifying widow or widower, and $55,000 for married couples filing separately.

Additional Child Tax Credit

If your income prevented you from taking full advantage of the child tax credit, you may be able to qualify for the additional child tax credit. Note that this credit is refundable so you can receive a tax refund from the government if you tax credit is larger than your tax bill. You should consult a tax professional if you think you might be eligible for this credit.

Child And Dependent Care Credit

If you paid for someone to take care of your child or dependent during the year so that you could work or look for work, you may be eligible for this credit. The actual amount of the credit will depend on your income and the amount of money that you paid for the care. If you are married, both you and your spouse must have earned income during the year unless one of you was a qualified student or was physically or mentally handicapped. The credit is not refundable. To qualify as an eligible child or dependent:

  • The child must be a dependent and must be under the age of 13.
  • The non-child dependent must not be able to physically or mentally care for themselves.

Earned Income Tax Credit

The earned income tax credit (EITC) allows people with qualifying income levels to reduce a portion of their tax bill. The actual amount of the credit is determined by the IRS after they consider your individual tax situation. However, the credit can be worth thousands of dollars in tax credit. The EITC is refundable which means that you can earn a tax refund if the value of the credit is more than your tax bill.

To qualify for the EITC in 2011, your income must be less than:

  • $43,998 ($49,078 for married filing jointly) if you have three or more qualifying children,
  • $40,964 ($46,044 for married filing jointly) if you have two qualifying children,
  • $36,052 ($41,132 for married filing jointly) if you have one qualifying child, or
  • $13,660 ($18,740 for married filing jointly) if you do not have a qualifying child.

Technically, you do not need to have children to qualify for the earned income tax credit. However, the tax benefits are larger if you have qualifying children. Furthermore, it is easier to qualify for the credit if you have children because the income maximums are increased. (For more information on the EITC, see Guidelines On How To Qualify For The Earned Income Tax Credit.)

For your child to count as a qualified child under the EITC, he/she must:

  • Be your child, stepchild, foster child, sibling, stepsibling or descendent of any one of the previous options.
  • Be younger than 19 or younger than 24 if a full time student at the end of the tax year. If your child is permanently and totally disabled, there is no age limit.
  • Have lived with you for more than half of the tax year.
  • Not file a joint return for the tax year.
  • Not be claimed by anyone else for the purposes of qualifying for the EITC.

Rising children is a lot of work. It’s also expensive. Therefore, Uncle Sam gives significant tax breaks to parents of qualifying children and dependents. If you have children or dependents, you may be eligible for one of these tax credits. Take the time to figure out if you qualify this year and you could end up saving thousands of dollars.

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