Child Tax Credits and Benefits

Chris Bibey
by Chris Bibey

There are many tax benefits that go along with having a child. It is essential that you know what these benefits are, so you can take advantage of them when tax filing season comes around. After all, you don’t want to miss out on any child tax credits and/or tax deductions that could help reduce your income tax liability.

Claiming Dependent Exemptions

The most common child tax benefit is the dependent exemption. On your tax return, you may claim one exemption for each dependent ― a “dependent” is defined as a qualifying child or relative.

According to IRS rules, you may claim a child as a dependent if the following conditions are met:

  • You (and your spouse, if filing jointly) cannot be claimed as a dependent on someone else’s tax return
  • You cannot claim a dependent exemption for a child if they are married filing a joint return (unless they have zero tax liability)
  • The child must be a U.S. citizen, U.S. resident alien, or U.S. national

Before you use a dependent exemption for a child, make sure that the child is yours to claim. While this is self-evident most of the time, it may not always be clear in some cases. The child qualifies if they are your daughter, son, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendent of those.

There are also age limits to be aware of when claiming dependent exemptions. The qualifying child must be under 19 years of age, or 24 years if they are a full-time student.

Finally, the child must have lived with you for more than half of the tax year, and they must not have provided more than half of their own support. If these requirements are not met, you cannot claim the child as a dependent on your tax return.

Claiming the Child Tax Credit

If you have children, you may be eligible for the Child Tax Credit which is a credit worth up to $1,000 for each qualifying child. This credit can help reduce or eliminate your overall tax bill and provide some financial relief for parents raising children.

To be eligible for the Child Tax Credit, your child must meet the following requirements:

  • He/she is younger than age 17 (as of the last day of the tax year)
  • He/she is claimed as a dependent on your tax return
  • He/she is a U.S. citizen, U.S. resident alien, or U.S. national

Of course, not everyone qualifies for the full $1,000 tax credit. The amount of your Child Tax Credit decreases if your adjusted gross income (AGI) exceeds $55,000 (for married couples filing separately), $75,000 (for single filers), or $110,000 (for married couples filing jointly).

Claiming the Child and Dependent Care Expenses Tax Credit

If you paid someone to care for your child, spouse, or other dependent (while you worked or searched for employment), you may qualify for the Child and Dependent Care Expenses Tax Credit.

To qualify for this tax credit, the expenses must have been for the care of a child (age 12 or younger) or other qualifying person who is incapable of self-care. The amount of the credit is based on your adjusted gross income (AGI) and may be up to 35% of the money you spent on qualifying expenses. For one child, the maximum tax credit is $3,000 ― for two children, the maximum credit is $6,000.

The more you know about child tax credits and other benefits, the more money you’ll be able to save on your tax return. While tax laws are constantly changing, keeping yourself informed is a critical part of successful financial planning.