Tax Benefits for Having Dependents

Even though the dependency exemption was eliminated under the tax reform, there are still some tax benefits you can take advantage of to maximize your tax refund if you have dependents. These tax benefits can significantly reduce or even eliminate your tax liability. Some of the credits discussed are refundable, which means that even if you don’t have any tax liability to offset, you will receive a refund. 

While we’ll help you to understand the tax benefits of having dependents below, don’t worry about remembering these rules come tax time. TurboTax will ask you simple questions about you and give you the tax deductions and credits you’re eligible for based on your answers.

Child Tax Credit: You may be eligible for the Child Tax Credit, which is a tax credit that you get for your dependent kids. It’s even better than a tax deduction because it reduces your taxes dollar-for-dollar.  For tax year 2024 (the taxes you file in 2025), the Child Tax Credit is worth up to $2,000 per qualifying child under age 17. You will be eligible for the full credit if your modified adjusted gross income is $400,000 or under for those who are married filing jointly and $200,000 or under for all other filers. For tax year 2024, $1,700 of this credit is refundable, up $100 from tax year 2023. 

Other Dependent Credit: If you don’t qualify for the Child Tax Credit and your dependent child is over 17 or you support a friend or a relative, you may still be able to claim the Other Dependent Credit of up to $500 per qualifying person. The credit begins to phase out if your adjusted gross income is greater than $200,000 (or $400,000 for married filing joint couples). For tax year 2024, this credit is nonrefundable. 

Child and Dependent Care Credit: If you pay for childcare, there is a tax credit that you may qualify for at tax time. If you are working or actively seeking work, and you pay childcare for your dependent who is under the age of 13 (no age limit if disabled), you can claim the Child and Dependent Care Credit. Nursery school, private kindergarten, after-school programs, daycare, and even summer and winter day camps are all qualifying expenses.

This credit is a dollar-for-dollar reduction of your taxes based on your childcare expenses and is a nonrefundable credit. 

• The expense limit for tax year 2024 is $3,000 for one qualifying individual and $6,000 for two or more qualifying individuals. 
• The percentage used to calculate the credit is up to 35% of expenses, so the maximum credit is up to $1,050 for one qualifying individual or up to $2,100 for two or more qualifying individuals. 
• This credit is reduced for taxpayers with income over $15,000. 

Earned Income Tax Credit (EITC): There’s a special tax credit available if your wages or self-employment income are below a certain income level. The amount of credit you receive is based on your income, filing status, and how many qualifying kids you have.

The refundable tax credit you can receive ranges from a maximum of $7,830 if you have three or more children to $632 if you have no children for tax year 2024. Unlike some other tax credits, the Earned Income Tax Credit is refundable, so if the credit is greater than the tax you owe, you can still receive the difference as a tax refund.

No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.