Are you a parent? It’s important to understand how support you provide to your children can alter your tax liability, and which types of support you can get credit for.
For each child under the age of 17 that you claim on your tax return, your taxable income is reduced by $1,000. The credit is phased out based on adjusted gross income levels and filing status. Taxpayers will experience a phase out if they make over:
- $110,000 – married filing jointly
- $75,000 – single or head of household
- $55,000 – married, filing separately
For every $1,000 that your adjusted gross income exceeds the above threshold, the credit is reduced by $50.
Child and Dependent Care Credit
This credit differs from the child care credit because it accounts for expenses accrued by paying for the care of your dependent under the age of 13 while you work. It may also apply to qualifying disabled dependents. This credit can offset anywhere from 20% to 35% of your qualifying expenses, and is assessed according to your income. The credit can max up to $3,000 in qualifying expenses for the care of one child, and up to $6,000 for two or more dependents.
Child support payments, those made under the decree of divorce or separation agreement, are not deductible by the payer, nor are they calculated as taxable income for the payee.