1. Child Tax Credit
One of the most common tax breaks for parents is the Child Tax Credit. A tax credit is a dollar-for-dollar reduction for your tax bill. Versus a tax deduction, which only reduces your taxable income.
Starting in 2018 the Child Tax Credit became worth $2,000 per qualifying child. To benefit from the Child Tax Credit, children must meet all six requirements.
- Must be under age of 16 at the end of the tax year
- Children are biological, adopted, step-, or foster; a sibling or step-sibling; or the descendant of any of these people
- Children cannot provide more than half of their own support during the tax year
- Must be listed as your dependent on tax return
- Children are U.S. citizens or residential aliens
- Live with you for at least half of the tax year
To claim the credit, your modified adjusted gross income (also known as adjusted gross income) with certain tax deductions included in, must be below $200,000 for single adults or $400,000 for married couples.
Those parents with higher adjusted gross income may still use the Child Tax Credit.
2. Adoption Tax Credit
The Adoption Tax Credit is another tax break for parents who have adopted a child through domestic or international adoption. This credit is meant to cover costs related to adopting a child, including court fees, travel, and adoption fees. The Adoption Tax Credit does not apply to those adopting their spouse’s child.
For the 2019 tax year, you can claim up to $14,080 per qualify child. To qualify for this credit, the child has to be under the age of 18 or is physically or mentally incapable of caring for themselves. Only households with a MAGI of under $211,160 can claim full Adoption Tax Credit. Those who exceed a MAGI of $251,160 are not eligible for the Adoption Tax Credit.
Keep in mind that the total credit of $14,080 can be distributed across different tax years. But the total can not exceed a combined $14,080. So for example, you started the adoption process in 2018 and claimed an adoption credit of $4,000. In 2019 you finalized the adoption and the cost was $12,000. The total amount of the credit you can apply for is now $10,080.
3. American Opportunity Tax Credit
The American Opportunity Tax Credit helps college students and their parents who are helping pay for tuition. The credit is worth up to $2,500 with the first $2,000 covered 100% and 25% of the next $2,000.
To qualify the student must meet the following:
-Pursuing a degree or recognized credential
-This is the first four years of post-secondary education
-Enrolled at least half-time for a minimum of one academic session during the tax year
-No felony drug convictions on their record
The expenses that qualify include tuition, supplies, and books. If grants or scholarships cover these costs, then the American Opportunity Tax credit cannot apply. Other expenses that cannot be covered include room, board, or transportation.
Single parents with adjusted gross incomes of $80,000 or less and married couples with MAGI’s under $160,000 are eligible for the full tax credit.
4. Lifetime Learning Credit
Another higher education tax break for parents is the Lifetime Learning Credit. This credit can cover up to 20% of qualifying expenses up to $10,000. So the credit maxes out at $2,000.
Only one of the two higher education tax credits can be claimed at a time. Therefore, you can qualify for either the American Opportunity Tax Credit or the Lifetime Learning Credit.
Single parents must make less than $58,000 to qualify. Married or joint filers must make less than $116,000 to qualify for the full credit.
5. Child and Dependent Care Tax Credit
This credit is designed for working parents who pay for childcare. It also extends to other dependents too, like a spouse, parent or anyone else who lives in the home for more than half the year that needs care. In order to qualify, the child must be 12 or younger at the end of the tax year.
The credit for one qualifying child is $3,000 and up to $6,000 for two or more children. Depending on your Adjusted Gross Income you can claim between 20% and 35% of your allowable child expenses. For more information on tax breaks for parents check out what the IRS has to say here.
In Conclusion
In conclusion, we hope these tax breaks for parents help save you money this tax season. If you are looking for tax-deductions please consider donating to Foster Love – Together We Rise and helping kids in foster care nationwide. Donate here.
