Tax Credits for Dependent Children
The cost of raising children is on the rise each year, but tax incentives from the U.S. government can help alleviate some of that expense. Single or married taxpayers who provide support for children may be eligible for certain tax credits for dependent children.
Other People Are Reading
-
Traditional Child Tax Credit
-
Parents or guardians who have primary custody of a dependent child may qualify for the child tax credit. This credit provides either a nonrefundable credit, which can be used to reduce taxes owed, or a refundable credit, which provides a refund in addition to reducing tax liability. The credit can be as much as $1,000 per each qualifying child. The qualifying child must be a U.S. citizen or national who is a resident of the United States and under the age of 17 during the affected tax year.
Child and Dependent Care Credit
-
A taxpayer who pays someone to care for a child or other qualified dependent may claim the child and dependent care credit. To qualify, the care must have been provided for a qualified child dependent up to age 12 or for a physically or mentally incapacitated older dependent. The care must have been in place so the taxpayer or jointly filing spouse could work or look for work, and the tax return must show earned income. The IRS permits a credit up to 35 percent of qualifying expenses.
-
Earned Income Tax Credit
-
Another tax credit open to those with dependent children is the earned income tax credit, or EITC. This allows a credit up to $5,666 for the 2010 tax year. The qualifying child must be a son, daughter, grandchild, or sibling by birth, fostering or adoption who lives with the taxpayer for more than half the year. The child must be 19 or under during the filing year or 24 or under if a full-time student. A child also may be classified as a dependent if that child is permanently and totally disabled at any point during the qualified tax year.
Income Qualification Guidelines
-
If the taxpayer earns too much income, tax credits for dependent children may be less advantageous. For example, the child tax credit is reduced by $50 for every $1,000 the modified adjusted gross income exceeds $75,000 for a single head of household, $110,000 for married taxpayers filing jointly or $55,000 for married taxpayers filing separately. Taxpayers also may be ineligible for the earned income tax credit for dependent children if income exceeds $48,362 or $43,352 for individuals in the 2010 tax year.
-
References
- Photo Credit BananaStock/BananaStock/Getty Images
