When you’re ready to file your return, you may be interested in knowing how you can save money just by being a parent. The sheer act of raising children can reduce the amount of taxes you owe. The following eight options are available to parent taxpayers:
- Dependent Deduction: Generally, you can claim your child as one of your dependents, which can grant up a deduction of $3.950. The deduction amount is phased-out at certain income limits, so it’s important to be aware of the guidelines.
- Child Tax Credit: If you have qualifying children under the age of 17, up to $1,000 per child. The Additional Child Tax Credit is also available for parents who get less than the full amount offered in the Child Tax Credit.
- Child and Dependent Care Credit: If you pay for child care while you work or seek work, you may be eligible to claim this credit. The credit applies to dependent children under the age of 13, and you must have paid for their care. Other requirements apply.
- Earned Income Tax Credit: You qualify for this credit if you earned less than $52,427 from working in the previous tax year. You can qualify with or without children or dependents. The IRS has an assistant tool to help you determine your eligibility.
- Adoption Credit: If you paid to adopt a child, you may be eligible to deduct the costs associated with the process. More details on qualifying expenses can be found on the IRS.gov website.
- Education tax credits: Both the American Opportunity Tax Credit and the Lifetime Learning Credit are available to students (or their parents who are paying for their expenses) who seek higher education. Depending on the credit, you may not even have to owe taxes to claim the credit, and you can even receive a refund of the credit amount if your taxes are reduced below zero.
- Student Loan interest: Did you know you can deduct interest paid on a qualifying student loan even if you don’t itemize your deductions?
- Self-employed health insurance: Those taxpayers who are self-employed and pay for their own health insurance coverage may be able to deduct premiums, including any costs to ensure your children under the age of 27 are covered. They aren’t even required to be your dependent.