Having a child is one of life’s most rewarding experiences, but it does add extra strain to your budget. Fortunately, the tax code offers parents some significant credits and deductions that can help make up the cost of food, clothes, child care, and doctor’s visits. Knowing how having a child affects your taxes could help reduce your liability, potentially saving hundreds or even thousands of dollars every year.
How Does Having a Child Affect Your Taxes?
1. The Child Tax Credit
In 2018, the child tax credit doubled to $2,000 for families making up to $400,000 and single parents earning $200,000 or less. This credit is also partially refundable, so you may receive up to $1,400 back if the credit wiped out your liability.
2. The Child & Dependant Care Credit
To help defray the costs of child care services, the tax code allows working parents to subtract these expenses from their tax bill. The amount of the credit ranges from up to $1,050 for one child to a maximum of $2,100 for multiple children, depending on your income.
3. The Earned Income Credit
The earned income credit is capped at $15,270 for single individuals and $20,950 for married couples without a child. However, adding a baby to the family increases the threshold to $40,320 for singles and $46,010 for couples, potentially shaving thousands of dollars off your tax bill. The earned income credit is also refundable, so you may get money back if the credit is more than you owe.
Navigating the tax code can be confusing and overwhelming, especially after major life changes. For over 20 years, families throughout Brownfield, TX, have relied on Donna Sellers CPA for detailed guidance and personal service that takes the stress out of preparing your taxes. Follow their Twitter for more financial tips and advice, visit their website to learn how they can help with your taxes, and call (806) 637-8556 today to make your first appointment.