Children are one of the largest and longest-running expenses in modern life, and Uncle Sam knows this – so kids can be money-savers for parents at tax time. You may be able to get a tax credit – reducing your taxes dollar-for-dollar – simply for having children. For example, as long as you have earned an income of at least $3,000 during the tax year, you may qualify for a child tax credit of up to $1,000 for each dependent child in your household under the age of 17. You can even benefit from the refundable portion of the child tax credit if you paid no taxes, meaning money in your pocket.
If you are a low- or moderate-income filer with children, you may also qualify for the Earned Income Credit (EIC), which can increase your refund by thousands of dollars, or turn an amount owed into a refund. The amount of your EIC depends upon the income you earned during the year and your filing status, and increases for each qualifying child – up to three children per household.
Parents who adopted during the tax year may claim a tax credit for some adoption expenses. This credit begins to phase out as income increases.
Parents should also be aware that, if their children had investment earnings or earned income of their own, they may have to file returns of their own as well, as there is no minimum age to owe income tax.