As a parent, managing finances can often feel overwhelming. Fortunately, the U.S. tax system offers several tax breaks that can help lighten the load. These tax benefits are designed to support parents with everything from childcare costs to education expenses. Here’s a breakdown of the top 10 tax breaks every parent should know about.
The Child Tax Credit is one of the most significant tax breaks for parents. For 2023, families can claim up to $2,000 per qualifying child under the age of 17. A portion of this credit may be refundable, meaning you could get a refund even if you don’t owe taxes.
Parents can use a Dependent Care FSA to pay for daycare, babysitters, or after-school programs with pre-tax dollars. This lowers your taxable income and can save you money on childcare expenses.
If you pay for child care so you can work or look for work, you may qualify for the Child and Dependent Care Tax Credit. This tax credit can provide up to 35% of eligible childcare costs, depending on your income.
The EITC is a refundable tax credit designed to assist low to moderate-income workers. Parents with children may be eligible for a larger credit, which could result in a significant refund.
Parents who contribute to a 529 college savings plan or a Coverdell Education Savings Account (ESA) can benefit from tax-free growth and tax-free withdrawals when the money is used for qualifying educational expenses.
Adopting a child comes with significant financial costs. The Adoption Tax Credit can help offset expenses, including adoption fees, court costs, and travel expenses related to the adoption process.
If you work from home and have a space dedicated to your work, you may be able to claim the Home Office Deduction, which can lower your taxable income and reduce your overall tax burden.
Parents who contribute to an HSA can reduce their taxable income. The HSA can be used to cover medical expenses, including those for your children, and any contributions made are tax-deductible.
For parents filing jointly, the standard deduction is higher than for single filers. In 2023, married couples filing jointly can claim a standard deduction of $27,700, which reduces taxable income and helps lower the amount owed.
Families with children who have disabilities may qualify for additional tax credits, such as the Child Tax Credit, or may be eligible for deductions related to special education expenses.
Parenting can be expensive, but these top 10 tax breaks can significantly ease your financial burden. By taking advantage of these tax benefits, you can help secure a better financial future for your family. Be sure to consult a tax professional to ensure you're maximizing your savings.