Inflation is making it more difficult for parents to afford the basics of life for their children. Economists estimate it costs parents approximately $20,800 per year to raise one child in 2023. That’s accounting for the cost of food, housing, clothing and childcare so parents can work. That doesn’t count the cost of college or trade school.
It highlights the importance of obtaining every credit and deduction possible when filing your federal income tax return. A tax credit decreases what you owe. A tax deduction decreases your taxable income. Children will need a Social Security card for you to claim those credits and deductions.
Child Tax Credit
This can earn you up to $2,000 for each of your children under the age of 17 if they qualify. The IRS has very specific rules in regard to your income level, filing status, and who qualifies as a dependent.
Credit for Other Dependents
An increasing number of families are intergenerational households. If you’re supporting a child too old to claim on the Child Tax Credit, you may be able to claim them under Other Dependents. Elderly parents living with you may also qualify.
Child and Dependent Care Credit
Paying for childcare so parents can work can cost $300 per week or more. If you qualify, you can receive up to $3,000 to help defray childcare costs for 1 child or $6,000 for 2
Earned Income Tax Credit (EITC)
To claim this, you’ll have to fall within certain income limits according to your adjusted gross income. The amount will vary, depending on the number of your dependents. People without children may also qualify.
American Opportunity Tax Credit
You can recoup a portion of the cost of sending your child to college if you paid for tuition, books or supplies. If you qualify, you can claim the credit for the first 4 years of their college.
Lifetime Learning Credit (LLC)
This can be worth $2,000 if you paid for qualifying expenses. There’s no limit on how many years you can claim it.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today (843) 347-0849 and discover why our clients return to Peavy and Associates, PC year after year!