It isn’t easy raising a future teacher, doctor, or electrician.
But if you’re a parent, that’s exactly what you’re doing. Today’s Etch-a-Sketch artists and Lego architects are the foundation of tomorrow’s society, so it’s not surprising that Congress would like to give parents some credit for all of their hard work—a tax credit, that is.
Unlike many tax provisions, the child tax credit is relatively straightforward. You can claim a credit of $1,000 for each child. If you have one, claim $1,000. If you have half a dozen, claim $6,000. It’s that easy. Naturally, the credit is available for your biological children. But did you know that you can claim a credit for adopted children, stepchildren and foster children? You can also claim relatives under the age of 17 who are members of your household. For instance, if your grandchildren live with you, you can receive a credit for them as well.
Unfortunately, the credit is not without limits. First, it is not refundable. For example, if you have two children and a $2,000 credit, but your tax bill is only $1,200, the credit will reduce your tax bill to zero but you won’t receive a refund of the remaining $800. Second, if you earn more than $75,000 as a single parent or more than $110,000 as a married person filing jointly, the credit is less than the advertised amount. As always, you should follow the IRS instructions (pdf) to figure out the reduction.
If you’re a proud parent, congratulations are in order. Your son or daughter may be president someday. In the meantime, though, Congress would like to lend you a helping hand, so don’t forget to claim the child tax credit.
Looking for additional tax savings? Be sure to check out the complete archive of Daily Deductions for more tax saving opportunities.