4 Tax Credits Every Parent Needs to Know About

To say raising a child is expensive is an understatement. A middle-income family of four can expect to spend $233,610 to raise a child from birth to age 18, according to the U.S. Department of Agriculture.

Fortunately, parents often qualify for tax credits that can help offset a sliver of these staggering costs. A tax credit directly reduces the amount you owe at tax time. Depending on the type of credit, they could help you score a bigger tax refund. Here are four tax credits every parent should be aware of.

1. Child Tax Credit

If you have a child who was younger than 17 at the end of 2023, you could be eligible for the Child Tax Credit. The credit is worth up to $2,000 per qualifying child. Of that, up to $1,600 is refundable, which essentially means you can increase your tax refund by as much as $1,600 even if you don't owe taxes.

Single parents with an income of less than $200,000 can qualify. For married couples filing a joint return, the income limit is $400,000. Taxpayers with incomes above these amounts may be eligible for a partial credit.

2. Child and Dependent Care Credit

Parents of young children may qualify for help with child care costs courtesy of the Child and Dependent Care Credit. The credit is available to parents of children who were 12 or younger at the end of 2023, provided that the parent (or their spouse) had earned income for the year, paid for child care, and needed child care to work or search for work. The credit may also be available if you paid for the care of another dependent who was unable to care for themself.

The Child and Dependent Care Credit is worth up to 20% to 35% of your expenses, depending on your income. It caps out at $3,000 for one child, or $6,000 for two or more children.

3. Earned Income Tax Credit

Many families with low or moderate incomes qualify for the Earned Income Tax Credit, or EITC, which is meant to provide relief to working families. Though you don't need to have children to be eligible, parents can qualify for a larger credit. The EITC is available to taxpayers who earned less than $63,698 in 2023. The maximum value is:

• $600 if you don't have dependent children
• $3,995 if you have one dependent child
• $6,604 if you have two dependent children
• $7,430 if you have three or more dependent children

If your income is less than the standard deduction -- $13,850 for single filers and $27,700 for married filing-jointly couples in 2023 -- you're not required to file a tax return. But if you're a working parent whose income fell below these thresholds, the EITC could make it worth it to file a tax return anyway, as the credit is refundable.

4. Education tax credits

Parents who are paying for their child's educational expenses may be eligible for either the American Opportunity Tax Credit (AOTC) or a Lifetime Learning Credit (LLC). Though you CAN claim both credits on the same tax return, you CAN'T claim both credits for the same student on the same return. Both are only available to individual taxpayers with an income of $90,000 or less, or married couples filing a joint return who earn less than $180,000.

The American Opportunity Tax Credit is worth up to $2,500 per student, of which 40% is refundable (up to $1,000). You can use the credit to help pay for undergraduate tuition, as well as some other education-related expenses, like books and supplies. The credit can only be claimed for any one student for up to four years.

The Lifetime Learning Credit is worth up to $2,000 per return. Unlike the AOTC, it isn't refundable. But you're not limited as far as how many times it can be claimed per student, and it can be used if your child is enrolled in an undergraduate, graduate, or vocational program.

Both credits are only available to parents who claim their child as a dependent for tax purposes. However, independent students may be able to claim either credit for their own educational expenses.

How to qualify for tax credits for parents

To claim any of the tax credits listed, the child needs to be your dependent. In IRS speak, that means you provide more than half of their support for the tax year.

Though the eligibility rules for tax credits can get confusing, the tax-filing software makes it pretty easy to figure out whether your child counts as a dependent and what credits you can claim on their behalf. If you're not sure if you qualify for a tax credit, be sure to file a tax return, even if it isn't required. Though filing taxes is never fun, it's worth the effort to ensure you're not leaving money on the table.