Do Parents Get Special Tax Breaks?

Thankfully, there’s some financial relief for those who have kids.

By Maurie Backman

While raising children can be a wonderful experience, it’s also an expensive prospect. From clothing to food to medical care, raising a child from birth to age 18 costs close to $250,000 on average. Thankfully, there are some special tax breaks available to parents to help ease the burden.

1. Tax exemptions
The IRS gives you one exemption for each child you can claim as a dependent. For 2015 tax purposes, $4,000 of your income is exempt from taxation for every qualifying child you have living under your roof, and this figure actually increases to $4,050 for 2016. There are income limits for claiming these exemptions. For 2015 tax purposes, the limit is $258,250 for single parents and $309,000 for those who are married and file jointly. For 2016, the limits increase to $259,400 for single parents and $311,300 for couples who are married filing jointly. Your exemption will be gradually phased out as your income exceeds those thresholds — see this IRS page for more details.

And there’s another catch: You can’t claim these exemptions if you’re required to pay the Alternative Minimum Tax.

2. Child Tax Credit
Depending on your income, you may be eligible for a $1,000 tax credit per child under the age of 17. If you do get the credit, it will reduce your tax bill dollar for dollar up to the full $1,000 per qualifying child in your household. As is the case with several credits, the Child Tax Credit is subject to a phase-out for higher earners. It starts at $75,000 for single filers, $110,000 for couples who are married and filing jointly, and $55,000 per filer for married couples filing separately.

Because the Child Tax Credit is nonrefundable, the most it can do is reduce your tax liability to zero. However, a related credit called the Additional Child Tax Credit may provide you with a refund even if you don’t end up owing any taxes. You may be eligible for the Additional Child Tax Credit if your Child Tax Credit exceeds your total tax liability and you earned at least $3,000 in income.

3. Child and Dependent Care Credit
If you need to pay for child care in order to work or look for work, then you may be eligible for the Child and Dependent Care Credit, which lets you claim up to 35% of the cost of qualifying child care expenses (such as a day care center) with a maximum of $3,000 for a single child under 13, or $6,000 for two or more children under 13. Your credit is calculated as a percentage of your expenses, and that percentage can fall anywhere from 20% to 35% depending on your income. Those earning less than $15,000 will qualify for the full 35%, while those earning $43,000 or more are capped at 20%.

Like the Child Tax Credit, the Child and Dependent Care Credit is nonrefundable. However, in addition to the Child and Dependent Care Credit, you can also allocate up to $5,000 per year in pre-tax dollars to pay for child care so that you and your spouse can work or look for work.

4. 529 plans
Though anyone can open a 529, parents typically stand to benefit from these tax-advantaged college savings plans. With a 529 plan, your money can grow and be withdrawn tax-free, provided it’s used for qualifying higher-education costs. Although the money you contribute isn’t tax-free, you won’t pay taxes on your investment gains. Since college is a major expense for many parents, 529s can offer significant savings for those who use them wisely.

Though raising children can be challenging on both an emotional and financial level, it’s good to know that there are some tax breaks available to help you with that second one. If you have children, it pays to see which tax breaks you might be eligible for — because if you’re like most parents, every little bit helps.

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Drew Limsky

Drew Limsky



Drew Limsky joined Lifestyle Media Group in August 2020 as Editor-in-Chief of South Florida Business & Wealth. His first issue of SFBW, October 2020, heralded a reimagined structure, with new content categories and a slew of fresh visual themes. “As sort of a cross between Forbes and Robb Report, with a dash of GQ and Vogue,” Limsky says, “SFBW reflects South Florida’s increasingly sophisticated and dynamic business and cultural landscape.”

Limsky, an avid traveler, swimmer and film buff who holds a law degree and Ph.D. from New York University, likes to say, “I’m a doctor, but I can’t operate—except on your brand.” He wrote his dissertation on the nonfiction work of Joan Didion. Prior to that, Limsky received his B.A. in English, summa cum laude, from Emory University and earned his M.A. in literature at American University in connection with a Masters Scholar Award fellowship.

Limsky came to SFBW at the apex of a storied career in journalism and publishing that includes six previous lead editorial roles, including for some of the world’s best-known brands. He served as global editor-in-chief of Lexus magazine, founding editor-in-chief of custom lifestyle magazines for Cadillac and Holland America Line, and was the founding editor-in-chief of Modern Luxury Interiors South Florida. He also was the executive editor for B2B magazines for Acura and Honda Financial Services, and he served as travel editor for Conde Nast. Magazines under Limsky’s editorship have garnered more than 75 industry awards.

He has also written for many of the country’s top newspapers and magazines, including The New York Times, Washington Post, Los Angeles Times, Miami Herald, Boston Globe, USA Today, Worth, Robb Report, Afar, Time Out New York, National Geographic Traveler, Men’s Journal, Ritz-Carlton, Elite Traveler, Florida Design, Metropolis and Architectural Digest Mexico. His other clients have included Four Seasons, Acqualina Resort & Residences, Yahoo!, American Airlines, Wynn, Douglas Elliman and Corcoran. As an adjunct assistant professor, Limsky has taught journalism, film and creative writing at the City University of New York, Pace University, American University and other colleges.