IRS Tax Credits and Deductions to Save on Your Taxes if You Have Kids

These child tax credits and deductions can mean a tax refund for you!

There are many money-saving tax credits and deductions that can reduce the tax burden on families with children. The Child Tax Credit, Child Care Credit and the Earned Income Credit can all mean tax savings for families with one or more children.  Remember, a tax credit is a dollar-for-dollar reduction of the taxes you owe.

Child Tax Credit

The maximum Child Tax Credit is $1,000 each qualifying child under 17.  Because this is a partially refundable tax credit, even taxpayers who do not owe taxes are eligible if they have earned at least $3,000 in 2010.  If you have four children, the credit can cut your tax bill up to $4,000.

Income Requirements: When income exceeds $110,000 (married filing jointly), $55,000 (married filing separately) and $75,000 (all others) the child tax credit begins to phase out.  If parents are divorced or separated, the parent who claims the child as a dependent is eligible to claim the child tax credit.  This is true even if the parent’s filing status is married filing separately.  The Child Tax Credit Table can help you determine if you are eligible for the full credit amount of $1,000.

To maximize the benefit of each credit, you must take the nonrefundable credits in a specific order.  (You must sometimes calculate other credits first to properly apply the child tax credit.)  You can complete your taxes online at home using H&R Block tax prep software that automatically identifies all the tax savings you are eligible for, and it guarantees you’ll get the maximum refund.

 

The Earned Income Credit can be worth up to $5,666 off your taxes

The Earned Income Credit (EIC) is a valuable credit for lower-income taxpayers who work.  It provides a tax credit for one child of up to $3,050 and a maximum of $5,666 for three or more children.  This Earned Income Credit Table for 2010 can help you determine how much you take off your taxes.  The EIC reduces the amount of tax you owe and may also give you a refund—it can mean money back to you even if you $0 in taxes!

 

Dependent Child Exemption

The $3,650 qualifying child exemption allows taxpayers to claim a dependent exemption for their child, stepchild, adopted child, eligible foster child, sibling or step-sibling, or a descendant of one of these.  Children must be under age 19 or under age 24 and a full-time student, and younger than the taxpayer, live with the taxpayer for more than half the year; and not provide more than 50% of their own support for the year.

 

Child and Dependent Care Credit

The tax credit for child and dependent care expenses allows taxpayers to claim a credit for expenses paid for the care of children under age 13.  There is a limit to the amount of qualifying expenses.  The credit can be up to 35% of your qualifying expenses, depending upon your adjusted gross income.

By H&R Block’s Leigh Mutert, CPA and hrblock.com Community Manager (Think you may have missed out on tax credits in past years? H&R Block will review your tax 2007-2010 tax returns to see if you should get money back. This is free at any H&R Block office through March 31st.)

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Published or updated January 16, 2014.

Comments

  1. What are some deductions that might be useful for those of us that don’t have kids?

  2. Great info! Here are some tips of my own regarding the child tax credit – http://www.bethbcpa.com/got-kids-tax-tips-for-taxpayers-with-tots-teens/

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