The 5 Best Tax Breaks For Parents
Tax season is almost here. That means lots of stress and calculations, especially for parents. When you’re responsible for caring for one or more children, you want to get as much money back as you can, and there are a variety of tax breaks for parents that are designed to make your life easier. The last thing you need as a new mom or dad is to worry about out-of-pocket medical costs. Here are five tax breaks you’ll want to consider for this year.
Child Tax Credit
Sure, it costs roughly $230,000 to raise a child from infancy to adulthood, but at least you can get a few bucks back during tax season. When a child is born, you’re instantly eligible for the Child Tax Credit, paying you up to $2,000 (depending on your income) for each dependent child under the age of 17.
This rule is especially important for single parents looking to catch a (tax) break. By filing as head of household, you’ll generally receive a lower tax rate than if you file as single or married filing separately. It also allows a higher standard deduction.
To qualify as head of household, you must A) Be unmarried on the last day of the tax year; B) Contribute more than 50% of the financial support within the home; and C) Have at least one child or dependent who lives in the home with you for more than 6 months of the year.
American Opportunity Tax Credit
If you’re stressing about being able to afford your child’s college tuition, don’t let the American Opportunity Tax Credit pass you by. This allows parents to claim up to $2,500 for tuition and other school expenses during the first four years of their child’s college education, which can be particularly helpful with books, housing, and other costs.
To qualify for American Opportunity Tax Credit, the student must attend university at least part-time. The maximum income for one parent is $80,000.
Out-of-Pocket Pregnancy Medical Expenses
On top of the stress of caring for a newborn baby, you now have to worry about medical bills and extended hospital stays. Luckily, there are ways to make this process a bit less stressful. Women who gave birth within the last year and were never reimbursed for out-of-pocket medical expenses are able to itemize these amounts as deductions.
Of course, there are prerequisites. To be eligible for this tax code, your out-of-pocket medical expenses must be at least 10% of your adjusted gross income. For example, a woman who earns $50,000 per year would only be able to claim this tax break if her medical expenses exceeded $5,000.
Child Care Tax Credit
Daycare for small children isn’t cheap. It typically averages over $10,000 each year. Luckily, you may be able to get a percentage back when it comes time to do your taxes.
The Child and Dependent Care Tax Credit is designed for working parents. You’ll only qualify for this if you’re paying for daycare for a child 13 years old or younger while you work or look for work. Like most tax breaks, the credit amount varies based on your personal expenses. According to the IRS, the percentage is determined by the amount of work-related expenses paid to a care provider in exchange for them taking care of your children. The maximum amount one can claim is $3,000 for one qualifying individual.
Giving Parents a Break
Whether you’re a single dad with two teenagers or a new mom overwhelmed by a screaming baby and rising medical bills, doing your taxes doesn’t always have to be a stressful affair. There are plenty of tax breaks designed to give you a little extra cash this year, which you can use for a nice family dinner, adorable baby outfits, or even a relaxing spa day for yourself. You deserve it!