Tax Tips for Parents

Being a parent at tax time involves more than just claiming the Child Tax Credit on your income tax return. Make it your first concern to apply for an SSN for your child as soon as possible after their birth. You’ll need this number to claim certain tax benefits, such as the Child Tax Credit. Make sure you triple-check that your child’s SSN is accurate when filing as well to avoid any delays or potential penalties.

If you employ a childcare provider or have a child in daycare, it’s important to maintain detailed records of your childcare expenses. You’ll need these records to claim the Child and Dependent Care Tax Credit, which is worth anywhere from 20-35 percent of qualifying childcare expenses depending on your income.  When keeping childcare records, include the provider’s name, address, and taxpayer identification number (usually their SSN or employer identification number). Keep track of your childcare expenses throughout the year and include all supporting documentation, such as receipts or invoices.

Single parents often qualify for the head of household filing status, which can result in lower tax liability compared to filing as single. To qualify, you must meet specific criteria. You must be legally unmarried and support other people (usually your children). The IRS considers you to be unmarried if you didn’t live with your spouse for the last six months of the tax year, you paid more than half the cost of your home during the year, or your home is the primary residence of your qualifying child. Claiming head of household status allows you a higher standard deduction.

The Earned Income Tax Credit (EITC) is a refundable credit available to low-income taxpayers. The amount you can claim depends on your filing status, adjusted gross income (AGI)/earned income, and how many children you have. It’s important to understand that children who are required to file a tax return must report their earned income on their tax return and not be included on your return. However, you can still claim the child as a dependent on your tax return if your child fits the requirements. 

Don’t overlook valuable education-related tax breaks designed to help reduce the financial burden of higher education expenses. For example, the American Opportunity Credit and the Lifetime Learning Credit are available for qualified education expenses, such as tuition and fees. Additionally, tax-advantaged savings accounts like the Coverdell Education Savings Account (ESA) or the Qualified Tuition Program (QTP), also known as a 529 plan, offer tax benefits when used for educational purposes. Make sure to explore and understand these options to take full advantage of the available educational tax breaks.