Now you can get a credit worth either $500 or $200. It all depends on your modified adjusted gross income, however.
This guide is going to introduce you to the tax credits and exemptions you can claim on your taxes.
Tax Credits for a Dependent Child
The main tax credit for a dependent child is the Child Tax Credit. If your child is under the age of 17, you’ll see your taxable income reduced by $2,000. Take note that a dependent child may only be claimed on a single tax return.
The next credit is the Child and Dependent Care Credit. This is designed for covering childcare expenses and is a dollar-for-dollar reduction of your total taxable income. The credit is worth $1,050 for a single child or $2,100 for two or more children. The more you earn, the less this credit is worth.
You also have the Earned Income Tax Credit (EITC). The EITC is one of the most powerful credits available today. If you have three or more children and earn less than $50,594 as a single taxpayer or $56,844 as a married taxpayer filing jointly, you can qualify.
The value of the EITC is $6,660 if you qualify for the full amount. The average payout from the IRS is around $3,300.
What is a Dependent Tax Exemption?
Under the old system, a dependent on your tax return would reduce your taxable income. However, from 2018, this has all changed, and it no longer exists. Every dependent will now give you a tax credit, which reduces your tax liability dollar-for-dollar.
In many cases, this is an excellent change, but the overall value of the tax break for dependents was reduced. It used to be worth around $4,000.
Try the Dependents Tax Credit and Deduction Calculator
Want to find out how much your children could be worth on your taxes this year?
Try this dependent tax credit and deduction calculator. Just answer the basic questions, and you’ll find out which credits you qualify for and how much they could be worth to you.
It takes only minutes to find out if you could be entitled to a refund this tax year!
Dependent Tax Deduction vs. Dependent Tax Credit
There’s always some confusion regarding a tax deduction and a tax credit. In this case, a tax credit is a dollar-for-dollar reduction of your tax liability. Therefore, $500 in tax credits would reduce your tax bill by $500.
A dependent tax deduction, on the other hand, would lower your taxable income, equal to a percentage of the tax bracket you happen to fall into.
What about Tax Credits for Child Support?
Child support is tax-neutral. It neither increases the income of the party receiving the payments, and it doesn’t reduce the taxable income of the person making the payments.
There are no tax credits, exemptions, or deductions for child support payments.
How to Claim Dependents on Your Tax Return
We recommend using online tax filing for this reason. The online software will ask you some questions about your personal and financial situation to determine which credits you may be eligible for and help you claim your dependent tax credits.
You don’t need to worry about fumbling around for various IRS forms because they will tell you everything you need and fill out these forms for you, based on the information you provide.
Filing your taxes has never been this easy.
If you haven’t received your W2 yet you can get your W2 online for free with the W2 search and import tool from TurboTax.