7 Ways Claiming a Dependent Can Lower Your Taxes

children reduce taxes owed

There are several federal tax breaks for taxpayers who claim dependents on their return. These breaks can reduce the amount of tax you owe and even increase your refund.

TaxSlayer helps you find all the credits and deductions you’re eligible for based on the information you provide when you file your return. If you claim one or more dependents, these breaks might apply to your situation.   

Child Tax Credit (CTC)

If you have a child or children under the age of 17, you may be able to claim the Child Tax Credit. The CTC can reduce your tax bill by up to $3,600 per qualifying dependent. There is no limit to the number of children you can claim, but each one must meet the IRS requirements to qualify. This credit is also refundable. This means you could receive some or all of it back in your refund if your tax liability is $0.

If your dependents are over age 17 or they don’t qualify for the CTC for other reasons, you may still be able to claim a tax credit worth $500 per dependent. This credit is not refundable, but it can reduce your tax bill if you have one.

Child and Dependent Care Credit

If you need to pay for care for a young dependent so that you can work or search for a job, you may be eligible for a tax credit worth up to 50% of qualifying expenses. Learn more.

Earned Income Tax Credit (EITC)

The EITC benefits taxpayers with low- to moderate-income levels. You must have earned income to claim the credit. The amount of credit you could get depends on your adjusted gross income (AGI) and the number of children you claim. For example, a married couple with three dependents earning less than $57,414 can qualify for up to $6,728 in credit.  

Find out if you qualify for the Earned Income Tax Credit.

Adoption tax credit

Parents who are trying or have adopted a child within the tax year could be eligible for a non-refundable tax credit worth up to $14,440 per child. Learn more about the adoption credit.

Education tax credits

If you have dependents in college, you may qualify for special tax credits for people enrolled in higher education. The American Opportunity Tax Credit (AOTC) is worth up to $2,500 per year and is refundable up to $1,000 for students who qualify. Those who don’t qualify for the AOTC may still be eligible for the Lifetime Learning Credit, worth up to $2,000. Learn more. 

Student loan interest deduction

Is your dependent a college student? If you meet all the requirements, you could claim up to $2,500 for interest paid on student loan debt. Interest on a qualified student loan may be deductible even if you do not itemize deductions. It can also be taken in addition to one of the education credits. Learn more.

Health insurance premiums deduction

If you are self-employed and pay for your own health insurance, you can deduct the cost of premiums paid for you as well as your spouse and your dependents.

This post is up to date for tax year 2021 (returns filed in 2022).

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