7 Amazing Tax Breaks Every Parent Should Know About

7 Amazing Tax Breaks Every Parent Should Know About
As a parent, you’re probably looking for as many ways to save money as you can find. Fortunately, the IRS offers some generous tax breaks to people who have dependent children living at home.
Here are 7 amazing tax breaks that every parent should know about.

1. The Dependent Exemption

As soon as you and your spouse welcome a new child into your home, you’ve earned a nice tax break from Uncle Sam. As of this writing, you get a tax exemption of $4,000 per child. That means if you have three children living at home, then you’ve earned a $12,000 exemption.

That exemption could set you up for a sizable refund in April. Be sure that you work the additional income into your monthly budget calculator.

Keep in mind, though, that this tax break doesn’t apply to people who have a high income. If you’re single and your adjusted gross income (AGI) is more than $258,250 or you file joint and your AGI is more than $432,400, you won’t be able to claim the benefit.

2. Child Tax Credit

You also get a $1,000 tax credit for each child. That’s money that comes right off of your taxes instead of being subtracted from your income.

To qualify, your AGI must be $110,000 if you’re filing joint, below $75,000 if you’re filing head of household, or below $55,000 if you’re married but filing separately.

3. Child Care Credit

You might be eligible for child care credit if you paid for child care last year while either working or searching for a job. Uncle Sam is willing to give you a credit of as much as 35% of your child care costs, with a hard stop at $3,000 per child or $6,000 for more than one child.

The credit applies to children under the age of 13.

4. You Can Hire Your Kid

One especially sneaky way to lower your tax bill is by hiring your own child. You can pay the child as an employee and claim the payment to the child as a tax deduction. You won’t have to worry about withholding FICA, Medicare, and federal taxes from your child’s paycheck if he or she is under 18.

5. Tax Credits for College Kids

If you have a child who’s in college, you might qualify for a tax credit. Uncle Sam offers a credit of up to $2,500 per student. To qualify, your AGI must not be higher than $80,000 if you’re single or $160,000 if you’re married and filing joint.

6. Dependent Care FSA

The federal government also offers a dependent care flexible spending account. That lets you set aside as much as $5,000 of pre-tax money towards child-care costs. You can’t claim this benefit if you’re using the child care tax credit described above, though.

7. Adoption Pays

Believe it or not, you can get a tax credit of $13,400 for adopting a child. That’s the government’s way of helping you out with adoption expenses.

Parenting is the toughest job that you’ll ever love. Fortunately, the federal government offers a variety of tax breaks to cash-strapped parents to help make the financial burden a little more bearable.

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