There’s no doubt about it: kids cost a lot of money. From the time they emerge from the womb, there are hospital bills, diapers, and feeding gear to pay for. As they get a little older, the costs morph into clothing that gets grown out of all too quickly, extracurricular activities, and tech gadgets that were the stuff of sci-fi when we were children ourselves.
There’s one time of year when having kids can save you big time, and can even make your wallet a little thicker. That time of year is tax season. This Spring, be sure to claim deductions and credits you’re eligible for by being a parent.
Claim Them as an Exemption
This one is a no-brainer, but the more members there are in your household, the more exemptions you can claim. Let’s say you’re a family of four, and you make $154,950 or less. You will get to claim $4,000 this tax season for each household member, or $16,000. That means your income will be lowered by sixteen grand, which has the potential to lower your tax bracket.
Claim Childcare Costs
If you pay for childcare throughout the year, you can deduct the expenses from your tax burden by using IRS Form 2441. The max you can claim for one child is $3,000, and for more than one you can claim $6,000. Of those claimable expenses, you can deduct up to 35%, depending on your income level. That means your tax burden could have the potential to be $2,100 smaller if you paid for childcare for more than one child.
Child Tax Credit
So you have two kids. You can claim up to $2,000 against your tax burden. If you make more than $110,000, the math starts to get complicated, but you may still be able to claim part of the Child Tax Credit.
If you only owe the IRS $1,500, and you qualify for the entire $2,000 credit, you can only claim $1,500 here. But when you move to the next one…
Additional Child Tax Credit
…you may be able to get that extra $500 back. Literally. The Additional Child Tax Credit is applied after you have figured out how much you owe the IRS, so if your tax liability is $0, any amount you are able to claim on this credit comes back to you via a refund. Because in this specific example the Child Tax Credit wiped out all of your tax liability, you will also be getting back any money your employer withheld from your paycheck for Federal taxes.
Figuring out taxes isn’t for everyone. While it’s exciting to find out that your kids may have increased your tax refund, some people have even more fun when someone else figures that out for them. You can use programs like TurboTax, who has an app to make the process even easier. You give them your information, and the program runs all the numbers for you, maximizing your credits and potential refunds. You can save on this service by using TurboTax promo codes before you purchase.