Anyone that has kids knows they can get expensive.
Thankfully, Uncle Sam understands.
There are some overlooked credits and deductions that help fray the costs of your family. For instance:
- Child tax credit – gives you up to $2,000 for each qualifying child under 17
- Child and dependent care credit - is for any child under 13 that you take to (and pay for) daycare so that you can work. The credit could be up to $1,050 for one child and up to $2,100 for two or more kids, says Lisa Greene-Lewis, TurboTax ( (INTU) ) expert and CPA.
- Adoption tax credit – is worth up to $14,300 for the expenses incurred from adopting your child.
- Education tax credits – are for those who learn something new during the lockdown. The American Opportunity tax credit is worth up to $2,500 and can be applied to your first four years of college tuition. The Lifetime Learning credit is more lenient. You can get up to $2,000 per tax return even if you just took one class to improve your skills for your job, says Greene-Lewis.
Also don’t forget to deduct the cost of day camps – summer, sports, science, etc. -- if again you had to pay for those to keep the kids busy so you could work.
And finally, pay attention to the Earned Income Tax Credit, one in five taxpayers miss it, according to the IRS. For a family with three kids, it can be up to $6,660. It’s income-based, so just because you didn’t qualify in the past, doesn’t mean you won't in 2020. With so many people unemployed or working fewer hours, you actually may qualify now.
Related: Tax Tips: Filing Status Explained
Even better, the coronavirus relief package that passed in December, includes a provision that allows you to use your 2019 income -- instead of your 2020 income -- if it helps you qualify for more earned income tax credit.
So run the numbers and watch the video above for more details.