Having children will be one of the most expensive decisions you’ll ever make. Uncle Sam has your back because when you have children, you’re entitled to a number of tax credits.
We have a list of the three best tax credits you’re entitled to when you have children. Here’s what you need to know about them.
Child Tax Credit
The Child Tax Credit is the most common tax credit for parents with children. It’s a tax credit, so it reduces the amount you owe the IRS dollar-for-dollar. Deductions reduce your taxable income, which isn’t as significant as a direct credit.
For each qualifying child under 17, you can get a $2,000 tax credit. They must be claimed as your dependent, though, and they can only be claimed on a single tax return. Divorced parents should be aware of that.
Earned Income Credit
The Earned Income Credit is another popular tax credit for middle to lower income families. This coming year, the Earned Income Credit has been capped at $6,660. To qualify for the full amount, you would need to have three or more qualifying children and your income would need to fall below a certain threshold.
However, most families are entitled to something, if they don’t have a large income. The average Earned Income Credit was around $3,400, so it’s well worth your time to claim something like this.
Like all tax credits, it directly reduces your taxable income dollar-for-dollar. This credit also happens to be refundable, so if you don’t owe any taxes you could even get money back from the IRS.
Child Care and Dependent Tax Credit
The Child Care and Dependent Tax Credit is a type of tax credit provided to people who have various expenses. For example, if you need to send your kid to daycare because you must work you can claim back a portion of the expenses on your tax return.
You can claim a maximum of $2,000 per qualifying child. On a side note, in 2020 the tax credit is worth $500 for dependents who aren’t children, such as elderly parents who are living with you.
The income phaseout threshold is $75,000 for single taxpayers and $110,000 for married couples filing jointly, so most families in America would qualify for this tax credit.
How to Calculate Tax Credits for Children and Dependents
You can take advantage of the Dependents Tax Credit Finder/Calculator from TurboTax to find out more about whether you can claim tax credits and deductions for the dependents in your household.
This calculator makes it easy for you to find out which credits you’re entitled to and how much you can claim back on your tax return.
It takes only minutes to use. And it will give you a good idea of the credits you can claim and how much you qualify for. Most people find they can save at least hundreds of dollars, if not thousands, by claiming the right tax credits.
How to Claim Your Tax Credits
To start claiming your tax credits you should use the TurboTax online software today. In minutes, you can enter all the necessary information and discover exactly how much you can expect to pay to the IRS this year.
You don’t need to worry about accuracy because TurboTax guarantees accuracy on your return.
Which tax credits do you qualify for?