Children are a lifetime commitment, and that commitment comes with a hefty price tag. According to the USDA, The average cost to raise a child in their first 18 years is almost a quarter of a million dollars. Thankfully, the IRS offers incentives and breaks to help ease the burden on families — but not every family qualifies. Working with a tax professional can help to determine what you are eligible for, in order to ensure the best outcome. In the meantime, here are some of the top credits and deductions you should know about when filing your tax return:
Child Tax Credit
This year, changes to the Child Tax Credit will give families with children under the age of six up to $3600, and children ages six to 17 up to $3000. To qualify, families must have a modified adjusted gross income up to $75,000 for single filers or up to $150,000 for married couples. For more detailed information on the 2021 Child Tax Credit, read our recent blog.
Child And Dependent Care Credit
Parents who utilize services such as daycare and summer camp to help care for children while at work are typically able to claim them as a deduction when completing a tax return. Children must be under the age of 13 to qualify or mentally incapable of caring for themselves. Depending on income, families may claim up to $8,000 in eligible expenses for one dependent or up to $16,000 in eligible expenses for multiple dependents.
Student Loan Interest Deduction
This tax break is for parents and college students who took on a debt to pay for school. In this case, you may be able to claim up to $2,500 in interest paid from your taxable income. A loan qualifies for this deduction if it was taken out for the sole purpose of higher education by you, your spouse, or a dependent.
Education Credits
The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) includes tuition, learning materials, and other qualified expenses and fees incurred for college. There are distinct differences between the two options, but your tax professional can help you determine which credit is best for you and your student.
Earned Income Credit
The earned income credit is based on a percentage of your earned income and is not exclusive to parents, but families are able to receive a larger credit if they have dependents who qualify. If you have a child under the age of 19 who lives with you for at least half the year and has a valid social security number, and if you meet the income threshold, you may be eligible.
The above tax deductions and credits are greatly beneficial to any family. Hiring a tax professional can help you maximize these benefits and get you the best tax refund possible. For assistance, contact Drake Tax Services today!
Drake Tax Services has been serving the greater Philadelphia area since 1997. Its founder, Anthony F. Drake, is a professional accountant and IRS approved tax preparer who specializes in local, state and federal tax returns for both individuals and small businesses.
