Family Taxes: Take Advantage of Tax Savings

Tackling family taxes may seem like a puzzle, but have no worries—having a family can also come with the perk of some tax breaks!

Navigating the landscape of your family’s income taxes can be smoother going than you think, especially when you uncover the hidden gems in the tax code that were designed with families in mind.

Whether it’s claiming your parents or other dependents, there are ways to lighten your financial strain and keep more money in your pocket.

Explore how the benefits of having family-related deductions and credits can decrease your overall tax and potentially increase the amount of money you receive in your tax refund.

Key takeaways

• There are several credits and deductions that can help families save on their taxes.
• Some of the most common tax credits for families include the Child Tax Credit and the Earned Income Tax Credit, as well as credits for care expenses, adoption, higher education expenses, and more.
• Some of the most common deductions for families include writing off medical expenses, student loan interest, and education savings programs.
• For the 2025 tax year, the Child Tax Credit has increased to $2,200 due to the One Big Beautiful Bill Act (OBBBA). Starting in tax year 2026, the credit will be adjusted for inflation each year.

Are there benefits of having a family when doing taxes?

The benefits of having dependents can translate into significant tax savings. 

One of the best benefits for parents is the Child Tax Credit. It gives you a tax credit for each qualifying child. Because it reduces your taxes dollar for dollar, it’s more powerful than a deduction. Even better, some of it is refundable, so you might get extra money back in your pocket. 

Additionally, there’s the Earned Income Tax Credit (EITC), a financial boost for low-to-moderate-income families. This credit is refundable, so if it exceeds the tax you owe, you can receive the difference as a refund.

Parents can also benefit from the Credit for Child and Dependent Care, which offers relief for expenses incurred in caring for their child while working, looking for work, or while attending school full-time

Education-related tax breaks, such as the American Opportunity Credit and the Lifetime Learning Credit, can also ease the financial load of increasing costs. These credits reduce the cost of higher education for you, your spouse, and your dependents, while providing a significant reduction of your family’s income taxes.

These tax benefits are one way the government acknowledges the financial challenges that often accompany raising a family. While having children can enrich your life in many ways, these child-related tax breaks can help enrich your finances, providing tangible advantages when you file your tax return.

Let’s dive into the details of these tax credits so you can understand which ones apply to your family’s taxes.

Tax credits for families

The following tax credits for families will help reduce your taxes or even help provide you with a tax refund. These tax savings can be used towards everyday expenses, to fund your children’s education, or to contribute to future savings and financial planning goals.

Earned Income Tax Credit

If you have low-to-moderate income, then you may be eligible for the Earned Income Tax Credit (EITC).

The EITC is a government initiative that provides financial support to working families. The EITC helps ease the burden on family income taxes and ensures that families with lower earnings receive a meaningful financial lift.

For the 2025 tax year, you may be able to file for the EITC if you have earned income under $68,675 (for couples married filing jointly with three or more qualifying children).In addition, your investment income must be under $11,950.

You also need to have a Social Security number, and you must be a US citizen or a resident alien who lived and worked in the United States for more than half the year. For dependents to qualify, they must also have a Social Security number and must have lived with you, in the US, for more than half the year. It is important to note that there are exceptions for military members on active duty outside of the US.

The more dependents you have, the higher your potential credit. For example, those with one qualifying child may receive a credit of up to $4,328, while those with three or more qualifying children may receive a credit of up to $8,046.

Ultimately, the EITC is one way the government recognizes and supports hardworking families by putting a bit of extra cash in your pockets come tax time.

Child Tax Credit

This tax credit reduces your taxes dollar-for-dollar. You could receive up to $2,200 for each qualifying child with the Child Tax Credit, which was recently increased from $2,000 when the One Big Beautiful Bill Act (OBBBA) passed in July 2025.

 There are some requirements that must be met, such as:

• The child’s age: The child must be under the age of 17
• Your relationship with the child: They must be a dependent on your tax return and related to you by blood or marriage, or be placed in your home under a legal court order. 
• How you financially supported the child: They must receive more than half of their financial support from you, and they must have lived with you for more than half of the year.
• Their immigration status: The child must also be a US citizen or resident.

Your child also needs a Social Security number to claim the Child Tax Credit. Children with Individual Tax Identification numbers (ITINs) or Adoption Tax Identification numbers (ATINs) will qualify only for the Credit for Other Dependents.

The credit is gradually reduced if your modified adjusted gross income exceeds $200,000 (or $400,000 if married and filing jointly).

Child and Dependent Care Credit

The Credit for Child and Dependent Care is another tax credit you can claim if you have children. It is for the expenses associated with the care of your little ones (including nursery school, after-school programs, daycare, and even some summer camps).

If you have children under the age of 13 (there is no age limit if they are disabled) and you pay someone else to take care of them, you could qualify to receive this valuable tax break for child care.

The person who takes care of your children can’t be someone that you claim as a dependent (for example, an older child or your dependent parents) on your tax return.

Adoption Tax Credit

The adoption tax credit is another perk in the tax landscape for families, making the journey of expanding your family a bit more affordable. When you qualify, it helps offset the expenses incurred during the adoption process, covering things such as:

• Agency fees
• Legal costs (such as court costs and filing fees)
• Travel expenses
• Home study fees

For the 2025 tax year, the maximum amount for this credit is $17,280 per child ($16,810 for 2024). To claim this credit, there are some rules regarding the timing of your expenses:

• For domestic adoptions: Qualifying expenses paid before the year the adoption becomes final are eligible for this credit in the tax year following the year of payment. 
• For foreign adoptions. Expenses paid before and during the year the adoption becomes final are eligible for the credit.

Note that some expenses are not eligible such as the expenses for adopting your spouse’s child, and expenses for which you claim any other federal tax deduction or credit.

Education Tax Credits

You can claim an education tax credit if you, your spouse, or your dependent pays qualified expenses for higher education. The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are two types of education credits that may help reduce your tax liability.

The AOTC offers a credit for qualified education expenses during the first four years of higher education. It’s a great way to ease the financial load of:

• Tuition
• Books
• Other necessary education supplies

You can receive a maximum annual credit of $2,500 with the AOTC per student. If this tax credit brings your tax liability to $0, you can receive up to 40% of any remaining credit (up to $1,000) refunded to you.

There’s no limit on the number of years that you can claim the LCC. This credit is non-refundable, and you can receive a maximum amount of $2,000 The LLC caters to both undergraduate and graduate students, as well as those pursuing professional degrees. While the AOTC focuses on the early college years, the LLC provides a credit for a broader range of educational pursuits and includes courses to acquire or improve job skills.

There’s no limit on the number of years that you can claim the LLC. This credit is non-refundable, and you can receive up to $2,000 annually per tax return.

Deductions for families

These deductions directed toward families can help provide a bit of relief this tax season. As you start preparing your paperwork and as we approach the tax filing deadline, don’t overlook these deductions when filing your family taxes.

Medical expense deductions

If your family’s medical expenses are more than 7.5% of your adjusted gross income, you may qualify for a deduction. These expenses may include medical bills, insurance premiums, prescriptions, and even certain travel costs for medical care.

Medical expense deductions are provided to acknowledge the substantial burden that health-related costs can place on families. So, when tallying up family taxes, exploring medical expense deductions is a smart move!

Student loan interest deduction

The student loan interest deduction is a beacon of relief for those navigating the world of debt incurred for higher education. This interest deduction allows eligible taxpayers to deduct up to $2,500 of the interest paid on qualified student loans from their taxable income.

Contributions to 529 plans, designed to cover qualified educational costs, often come with state tax deductions. It’s like a double benefit – You are preparing for your child’s academic journey, and you are getting a break on your state taxes as well!  The amount of the contributions that may be deducted on your state returns (if any) vary among states and may only apply to specific state-sponsored plans.

It’s worth looking into whether and how these contributions may reduce your state taxes, as they can provide significant savings and tax-free growth on the contributions when later used  for qualified expenses.

Recent tax policy updates that impact families

The dependent exemption was expected to resume in 2026 after it was previously paused by the Tax Cuts and Jobs Act (TCJA) of 2017. However, the OBBBA has officially eliminated both the personal and dependent exemptions.

Families will still be able to take advantage of the nearly doubled standard deduction established by the TCJA and made permanent by the OBBBA. For the 2025 tax year, married couples filing jointly can take a standard deduction of $31,500.

As mentioned, the Child Tax Credit has also been increased up to $2,200 per qualifying child and will be indexed annually for inflation. 

Tax policies, including credits and deductions, often change from year to year, so it’s essential to check on updated amounts and eliminated tax benefits as you prepare to file.

This year, in particular, has seen a lot of changes.  Rest assured that TurboTax will make sure that your family gets every deduction and credit available to you on your tax return. 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.