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When Parenting Pays: Tax credits for parents and guardians

February 12, 2015

Here’s a great idea …
According to USDA’s 2014 report – Expenditures on Children by Families – a middle-income family can expect to spend about $245,340 to raise a child up to age 18. I whole-heartedly believe the little bundles of joy are worth every penny, but it is nice that they come with some tax exemptions and credits.

In other words …
Most people know that tax filers receive exemptions for dependents.  An exemption can be claimed for each qualifying child. Exemptions reduce your taxable income. Tax filers can deduct $3,950 for each dependent claimed in 2014.  Additionally, many working parents or guardians qualify for the Earned Income Tax Credit, the Child Tax Credit and the Child and Dependent Care Tax Credit.

Here’s how you can use this idea to have a better life …
A qualifying child can be your son, daughter, stepchild, foster child, brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them.  The qualifying child must have lived with you for more than half the year.  The regular exemption applies up to age 19. College students can be counted up to age 24 and you may qualify for deductions or credits related to tuition and other school expenses too.

The Earned Income Credit (EIC) increases for tax filers who have children.  Workers who were raising two children in their home and had income of less than $43,756 (or $49,186 for married workers) in 2014 can get an EIC of up to $5,460. The Child Tax Credit provides up to $1,000 per child under age 17. The Child and Dependent Care Credit is for families who need child care in order to work or look for work. You qualify if you paid for care for a qualifying dependent child under age 13 or a spouse or dependent not able to care for him (or her) self.

To find out more …
Details about the Earned Income Tax Credit, Child Tax Credit, Child and Dependent Tax Credit and tax benefits for education can be found at eitcoutreach.org. See all of the rules for filing status and tax credits from the Internal Revenue Service at www.irs.gov.

Individuals or families with a combined household income of $60,000 or less in 2014 can file free online.  Visit the U of A Extension website at www.uaex.edu to learn more aboutMy Free Taxes.

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