Raising children is one of life’s most rewarding experiences—but it’s also expensive. The good news? The tax code offers several credits and deductions designed to ease the financial burden on parents. Understanding these benefits can help families keep more of their hard-earned money and make smarter financial decisions year after year.
Whether you’re a new parent or have a house full of kids, knowing how to navigate tax rules can add up to meaningful savings. Let’s break down the key tax benefits of parenthood, what you might qualify for, and how to plan ahead.
The Child Tax Credit: A Big Help for Many Families
One of the most well-known tax breaks for parents is the Child Tax Credit (CTC). This credit is available to many families with children under age 17. For the 2024 tax year, qualifying families can receive up to $2,000 per child, depending on their income.
Here’s how it works:
- The child must be a dependent, under age 17 at the end of the year, and have lived with you for more than half the year.
- Your income must fall below a certain threshold—generally $200,000 for single filers or $400,000 for married couples filing jointly. Above that, the credit begins to phase out.
- A portion of the credit (up to $1,600) may be refundable, meaning it could result in a refund even if you don’t owe any tax.
Tax professional Andre Shammas emphasizes that many working-class and middle-income families overlook their eligibility for the CTC, or miss out due to simple filing mistakes. Always double-check your eligibility with a tax preparer, especially if your income or family situation changed during the year.
The Earned Income Tax Credit (EITC): A Lifeline for Lower-Income Families
The Earned Income Tax Credit (EITC) is another powerful tool, especially for working parents with modest incomes. Depending on how many children you have and how much you earn, the EITC can be worth several thousand dollars—sometimes more than $7,000.
Eligibility factors include:
- You must have earned income from work (wages, self-employment, etc.).
- The number of qualifying children affects the size of the credit.
- Your investment income must be below a certain amount, and your filing status matters too.
Unlike some other credits, the EITC is fully refundable, meaning you’ll get the full amount even if it exceeds your tax liability.
This credit has helped lift millions of families out of poverty. If you qualify, it’s a valuable resource that can go toward savings, debt payments, or everyday expenses.
Child and Dependent Care Credit: Help With Childcare Costs
If you pay for childcare so that you can work or look for work, you may be eligible for the Child and Dependent Care Credit. This credit helps parents offset the cost of daycare, preschool, after-school programs, and even some summer camps.
Key points:
- The credit is worth up to 35% of qualifying expenses, depending on your income.
- You can claim up to $3,000 in expenses for one child, or $6,000 for two or more.
- To qualify, the care must be provided for a child under 13, and both parents (if married) must have earned income.
This credit is not refundable, but it can still reduce your tax bill significantly. If your employer offers a dependent care flexible spending account (FSA), consider using it as well—it allows you to pay for childcare costs with pre-tax dollars, which can increase your total tax savings.
Education Savings: Planning for the Future, Saving on Taxes
While not directly part of your annual tax return, saving for your child’s education using a 529 College Savings Plan or Coverdell Education Savings Account can offer tax advantages in the long run.
Here’s what you need to know:
- Contributions to a 529 plan aren’t federally tax-deductible, but the earnings grow tax-free, and withdrawals for qualified education expenses are also tax-free.
- Some states offer a deduction or credit for contributions to their in-state 529 plan.
- Coverdell ESAs work similarly, though with lower contribution limits and income restrictions.
Andre Shammas encourages families to start small and grow their contributions over time. Even $25 or $50 a month can add up over the years—and the tax savings on the back end make it even more worthwhile.
Adjusting Withholding and Using Credits Wisely
Once you know which credits and deductions you qualify for, it’s time to plan strategically. If you typically receive a large tax refund, you may want to adjust your W-4 withholding form to increase your take-home pay throughout the year instead.
While a refund might feel like a bonus, it’s actually your money being returned to you without interest. Many families can benefit more by having those extra dollars in their monthly budget to help with bills, savings, or childcare.
It’s also important to track major life changes—like the birth of a child, job changes, or a move—because they can affect your tax situation. An annual review with a tax preparer can help you avoid surprises and maximize your credits.
Filing Status and Other Family Considerations
Your filing status—single, head of household, or married filing jointly—can make a big difference in your tax outcome. If you’re a single parent, filing as head of household typically offers better tax rates and a higher standard deduction than filing as single.
Make sure you:
- Accurately claim dependents
- Understand who qualifies as a dependent (children must meet age, residency, and support criteria)
- Don’t forget about potential healthcare subsidies through the Affordable Care Act if your income is lower and you have kids
All these details can add up to thousands of dollars in savings—or in missed opportunities if you don’t claim them correctly.
Don’t Go It Alone
Tax rules can be confusing, especially for families with kids. Between juggling work, parenting, and household responsibilities, it’s easy to overlook credits or make costly filing errors.
That’s why many families choose to work with a trusted professional. Someone like Andre Shammas, who specializes in family and small business tax preparation, can help identify savings opportunities, stay compliant with IRS rules, and even plan for the future with confidence.
Working with a tax professional doesn’t just make tax season easier—it can also improve your financial stability year-round.
Final Thoughts
Being a parent comes with endless responsibilities—but it also opens the door to several valuable tax benefits. From the Child Tax Credit to deductions for childcare and education savings, these tax breaks are designed to support families and ease financial stress.
To recap, here are the top ways parents can save at tax time:
- Child Tax Credit: Up to $2,000 per child
- Earned Income Tax Credit: Worth thousands for lower-income families
- Child and Dependent Care Credit: Up to $6,000 in qualifying expenses
- 529 Plans and ESAs: Tax-free growth for future education costs
- Withholding adjustments and planning: Better cash flow throughout the year
Taking advantage of these tools can make a big difference in your family’s budget—not just in April, but all year long. As always, don’t hesitate to seek guidance from a professional like Andre Shammas to ensure you’re getting the full benefit of what the tax code has to offer.
