Whether you're a new mama or have multiple little ones running around, we all know motherhood is busy. To add one more thing to your list, the tax filing deadline—April 15—is quickly approaching. Having children changes multiple parts of your filing process, especially when it comes to new deductions and credits. Depending on what you qualify for, certain tax credits and deductions for families could save you money on your taxes this year.
Here are the tax credits and deductions parents should know about for filing this year:
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 don't claim it. The credit is based on your earned income from working and can be worth up to $6,557 for a family with three kids, so don't miss out on this credit if you are eligible.
Child and Dependent Care Credit
You may 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—nursery school, private kindergarten, after-school programs and day care all qualify. 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.
Child care expenses are considered eligible for this credit if the primary reason for the expense is to ensure the child's well-being and protection. So, you're 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. Some basic requirements need to be met in order to take this credit.
In order to qualify, the child must:
- Be a citizen of the United States, U.S National or U.S. Resident Alien
- Have a Social Security number
- Be under the age of 17
- Be 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 tax reform law + why it matters in 2020?
The tax reform law that was passed in December 2017 impacted most taxpayers beginning with their 2018 taxes (meaning the taxes you filed last year), but there are a few important updates families should know that still affect you today:
- Five of the seven tax rates were lowered.
- The standard deduction has increased to $24,400 for married filing jointly, $12,200 for single or married filing separately and $18,350 for Head of Household, so you may benefit from a bigger deduction if you were already taking the standard deduction.
- Some deductions were either eliminated or reduced. According to the IRS, about 90% of taxpayers took the standard deduction instead of itemizing their deductions last tax season as a result of these changes.
The tax credits above may ease the tax bill for many families—and may even end up getting you a bigger refund. If you are unsure about what credits you may qualify for and how best to navigate tax season as a family, check in with your accountant or tax professional. TurboTax also offers a robust Tax Reform Hub, with a wealth of helpful information and tools that make it easy to file your taxes online.
Updated January 2020