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 of 12 years of 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.
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 2023 (the taxes you file in 2024), 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.
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. For 2023, up to $1,600 of the credit is refundable.
- The expense limit for tax year 2023 is $3,000 for one qualifying individual and $6,000 for more than one qualifying individual.
- The percentage used to calculate the credit is up to 35% of expenses, so the maximum credit is up to $2,100.
- This credit is reduced for incomes 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 $7,430 if you have three or more children, to $600 if you have no children for tax year 2023. 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.
So, next time the kids are driving you crazy, remember these tax savings and give them a big hug instead.