Whether you're a new parent or have multiple little ones running around, we all know parenthood is busy. To add one more thing to your list, the tax deadline—April 15—is quickly approaching. Having children changes multiple parts of your filing process, especially when it comes to new deductions and credits.
Here are what credits and deductions you may qualify for and how tax reform could impact your family's tax situation so you can save money this year.
Let's break down the deductions + credits:
Earned Income Tax Credit (EITC)
One significant credit that taxpayers sometimes miss is the Earned Income Tax Credit. According to the IRS, one out of five taxpayers who are eligible for the EITC fail to claim it. The credit is based on your earned income from working and can be worth up to $6,431 for a family with three kids so there is no reason to miss this credit if you are eligible.
Child and Dependent Care Credit
You should qualify for the Child and Dependent Care Credit if your kids are under the age of 13 (no age limit if disabled) and you regularly pay a caretaker to watch them so you can go to work. The credit can be up to 35% of dependent care costs of $3,000 ($1,050) for one child and up to 35% of dependent care costs of $6,000 ($2,100) for two or more children.
You may even be eligible for the Child and Dependent Care Credit if you dropped your kids off at summer day camp or sports camps as long as it was so you could work—overnight camps don't count. One last thing to keep in mind when considering this credit: the caretaker of your children cannot be someone that you claim as a dependent on your return.
Child Tax Credit
The Child Tax Credit allows parents a credit up to $2,000 for each qualifying child in 2018. Some basic requirements need to be met in order to take this credit.
In order to qualify, the child needs to:
- Be a citizen of the United States, U.S National, or U.S. Resident Alien
- Under the age of 17
- Filed as a dependent on your taxes
- Receive more than half of their financial support from you
- Have lived with you for more than half a year
What about the new tax reform law?
Passed in December 2017, the new tax laws impact the majority of taxpayers beginning with their 2018 taxes and there are a few important updates for families you should know.
- Five of the seven tax rates were lowered beginning in 2018 so you may have already received more money in your paycheck throughout 2018.
- The standard deduction has increased to $24,000 married filing jointly, and $12,000 for single or married filing separately so you may benefit from a bigger deduction if you were already taking the standard deduction.
- Some deductions were either eliminated or reduced. TurboTax estimates that about 90% of taxpayers will now claim the standard deduction instead of itemizing their deductions as a result of the changes.
The tax credits above are designed to ease parents' tax bill and may even end up getting you a bigger refund. If you are still unsure about what credits you may qualify for and how best to navigate taxes as a parent, check in with your accountant or tax professional. If you're looking to file online, TurboTax blog has a built a robust Tax Reform Hub, with a wealth of helpful information on what's changed with the new tax law.