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Tax Benefits for Having Dependents

Tax Benefits for Having Dependents

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Kids can be overwhelming when they are cooped up in the house during summer or winter break or while taking virtual classes at home, but they are also blessed tax-savers when you file your taxes.

Even though the dependency exemption was eliminated under tax reform, there are still some tax benefits you can take advantage of to maximize your tax refund if you have kids and other dependents.

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. 

Additionally, if you still have questions, you can connect live via one-way video to a TurboTax Live tax expert with an average 12 years experience to get your tax questions answered. TurboTax Live tax experts are available in English and Spanish, year round and can even review, sign and file your tax return, or you can fully hand your taxes over–all from the comfort of your home.

Child Tax Credit: You may be eligible for the Child Tax Credit, which is a tax credit that you get for your dependent kids, that’s even better than a tax deduction because it reduces your taxes dollar-for-dollar. Starting in tax year 2021 (the taxes you file in 2022), the Child Tax Credit under the American Rescue Plan increased from $2,000 to up to $3,000 per qualifying child over the age of six and up to $3,600 for each qualifying child under six. Under the new provision, this is the first time that families with children age 17 will be eligible for this credit. You will be eligible for the full credit if your income is under $150,000 for couples who are married filing jointly and $75,000 if you are single or $112,500 as head of household.  

Families who are not eligible for the expanded $3,000 or $3,600 credit because they earn higher than the modified adjusted gross income mentioned above may still be able to claim the Child Tax Credit up to $2,000 under the existing tax provision for each qualifying child under 17. This credit amount is still available to individuals earning up to $200,000 or married couples filing jointly earning up to $400,000. 

Eligible families may receive an advance payment of their 2021 Child Tax Credit of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above. Instead of getting this credit as part of your refund in 2022, these payments may be sent in advance and represent a portion of the tax year 2021 Child Tax Credit. 

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). 

Child and Dependent Care Credit: Childcare is expensive, but Uncle Sam can help you out with the cost. 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. The American Rescue Plan made some major changes to the Child and Dependent Care Credit for tax year 2021 only.

  • The expense limit increased from $3,000 for one qualifying individual to $8,000 and from $6,000 for more than one qualifying individual to $16,000.
  • The percentage used to calculate the credit increased from up to 35% to 50% of expenses so the maximum credit is up to $8,000 ($16,000 x 50%).
  • Income phase outs have increased, but there is an income where the credit is completely phased out. Prior to the American Rescue Plan the credit was reduced at incomes over $15,000. For tax year 2021 only, the credit is reduced at adjusted gross income of more than $125,000 and it is completely phased out at adjusted gross income of $438,000.
  • For tax year 2021, the credit is fully refundable, meaning you can get the credit even if you don’t owe any taxes.

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 $6,728 if you have three or more children, to $1,502 if you have no children for tax year 2021. 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.

If you earned less income as a result of the events that occurred in 2021, generally lower income can possibly decrease the amount of Earned Income Tax Credit you receive. However, there is a special lookback provision that allows you to use your higher 2019 earned income to determine your 2021 Earned Income Tax Credit, which may give you a higher Earned Income Tax Credit. 

TurboTax will walk you through determining which income (2019 or 2021) will give you the best tax outcome. 

So, next time the kids are driving you crazy, remember these tax savings and give them a big hug instead.

92 responses to “Tax Benefits for Having Dependents”

  1. hi i would like to know if my boyfriend is getting money back he earned 52000.00 he is claiming our daughter ..and we pay cash for child care does that counts..

  2. my daughter that is my dependent and full student in college, earned $25 in another state but turbotax wants an extra $50 to file that second state return. Any way that I can do it under the deluxe software I bought to do her federal and state (residence)?

  3. Yes I have 2 kids and me and my boyfriend did our taxes with Jackson Hewitt and we didn’t even get back a $1000 how is that right? When last year my boyfriend got back $1500 for just him and our son Jackson Hewitt said it’s because my boyfriend didn’t have health insurance I feel like they made a mistake when we have 2 kids I really do cause my sister has 2 kids and she’s getting back alot and so is my boyfriend step brother and they both have to kids

      • Hi Jenny,

        The penalty removal for not having health insurance does not take effect until the 2019 Tax Year filing (the Tax Returns filed in 2020)

        For Tax Year 2018 (the Tax Returns filed in 2019): The penalty for a person or family without health insurance is:
        Per adult-$695 and $347.50 per child
        Maximum of $2085 per family or 2.5% of your family income (whichever is higher)

        Thank you

  4. I have question im going go start this new job and making count, I would be making atleast 41K over the year but I’m a family of 4, 3 kids and myself. And I was wondering if When its time to file for taxes there would be an issue since im passing the 37K because i have read that for a family of 4 you should atleast make 37K? Helpp!?

  5. Hi,
    I live with my boyfriend and we have 1 child together and I have an older child (full custody). For the last couple of years, he claims our child and I claim my older child. I always thought that that was the best way to get the most credit back. If I claimed both kids this year (I made more money than my bf) would this be more beneficial? I have paid $8,760 in childcare this year. I would also qualify for medicaid if I claimed both kids. I can’t afford the “affordable healthcare” because we pay $730 a month for daycare, My boyfriend thinks we would get more back if we claim the kids separately.

  6. Hi, My kids and wife arrived in USA April 2017. I sent tax return with W7 forms to get dependent benefit. I Received ITIN numbers for my two kids and wife. But i did not receive any dependent benefit. Is it possible to claim kids after Federal tax return.

  7. Why is it that for federal tax filing purposes, my 17 year old is no longer considered to be a dependent but for FAFSA, he’s a dependent until age 26? Can the federal government please make up their minds???!!!

  8. Thank you for sharing this information. This is very helpful for those who are incoming dependents to the family and this will reflect to your total savings. Get an arrangement of your tax credits and maximize your fund refund.

  9. I would like to know approximately how much I would be getting back with three dependents. I have a 6 and 5 yr. old daughter and my husband who is a stay at home dad. Thank you

    • Hi Astrid,
      It depends how much money you earned and how much you had withheld from your taxes. I can tell you you will get dependent exemptions of $4,050 for each dependent and a $4,050 personal exemption for you and you husband. You also will get the child tax credit worth $1,000 per dependent, and you may be eligible for the earned income tax credit.
      Thank you,
      Lisa Greene-Lewis

    • Hi,
      Congratulations! In order to claim your baby for 2016 she would have to be born by December 31, 2016. You can claim her on your 2017 taxes. Make sure she has a valid social security number so you can claim her and also get the tax deductions and credits you are eligible for. TurboTax will ask you simple questions about you and give you the tax deductions and credits you deserve based on your answers.
      Thank you,
      Lisa Greene-Lewis

  10. Hello, I was wondering if you can tell me an estimate of how much do I get back per dependent one is 10 and the other one is 15 and 16

    • Hi Erika —

      There is no way to tell you how much you get back per dependent since your refund depends on so many other factors: your marital status, income, deductions, child care expenses, etc. You can begin your return with TurboTax. As you begin to enter your information you will begin to see the amount of your refund or how much you owe. Be aware that this amount will change as you enter more items. Begin your online return here:

    • Hi Courtney,
      Yes, even if she was born on December 31 she can be claimed as your dependent. Make sure you have her social security number when you file so you can get the tax deductions and credits for dependents.
      Thank you,
      Lisa Greene-Lewis

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