Taking care of kids can be costly. Luckily, there are several tax credits and deductions you can take advantage of to make more wiggle room in your budget.
1. Earned Income Tax Credit (EITC)
The EITC helps people with low to moderate incomes. It reduces how much tax they owe and could even result in a refund.
Your income will have to sit below a certain threshold to be eligible for this tax credit. That threshold will depend on how many children you have and your filing status, such as single, jointly with your spouse, etc.
It’s worth noting that you can be eligible for the Earned Income Tax Credit if you do not have any children.
2. Child Tax Credit
If you have children under the age of 17, you may be eligible for the Child Tax Credit. Eligibility begins as soon as they are born.
Depending on your income, you can get $2,000 for each child under 17.
3. Child and Dependent Care Tax Credit
The cost of childcare has gone through the roof. It’s so high that some parents quit work altogether since it makes more financial sense.
If you paid for childcare, you could get some of that reimbursed via your taxes through the Child and Dependent Care Tax Credit.
As long as your child is under the age of 13 and you were either looking for work or employed, you can get reimbursed for a portion of your childcare expenses.
4. Pregnancy Expenses
Did you have a baby last year? First, congratulations! And second, you can get reimbursed for out of pocket medical expenses related to your pregnancy.
If you were never reimbursed for pregnancy expenses, you could itemize them as deductions on your tax return.
The expenses will have to equal at least 10 percent of your adjusted gross income to be eligible. When you consider the cost of pregnancies and the medical care they require, however, reaching that threshold shouldn’t be hard.
5. Head-of-Household Status
Filing as head-of-household instead of single can reduce your tax rate. Keep this in mind if you are single but have children.
To qualify for this tax break via head-of-household status, the dependent will have to live with you more than six months per year. You will also have to contribute over half of the household’s financial support. Lastly, you’ll need to be unmarried on December 31.
6. American Opportunity Tax Credit
Some parents’ child-related costs extend well past their teenage years. This is especially true if you decide to fund your child’s college education.
While that added cost may put a burden on your budget, you can use the American Opportunity Tax Credit to get some of it back.
This credit lets you claim up to $2,500 for tuition and expenses during your child’s first four years of college.