NEW YORK — There are a few tax tips parents of children 17 and younger should keep in mind before filing, tax professionals say. Here’s what you need to know:
The child tax credit for 2023 is lower than in previous years, when it was expanded due to COVID. This means that taxpayers with one or two children may get a lower credit for their children under age 17 than in 2021. However, it is still up to $2,000 per child, and it can be claimed in addition to the standard deduction and will reduce your total tax bill, said Eric Bronnenkant, tax director at Betterment, a financial advisory company that provides digital investment, retirement and cash management services.
The Child and Dependent Care Credit is available for expenses paid for a child who qualifies for day care. It can also be used for dependents who cannot care for themselves, if the requirements are met.
Additionally, up to $3,000 per child (up to $6,000 total) in child care expenses can be deducted. If you have a dependent care program through your employer, you also get to deduct up to $5,000 a year in pretax dollars, says Mark Jaeger, vice president of tax operations at TaxAct, a company based in Cedar Rapids, Iowa, that provides for Income Tax Preparation Software for Consumers and Tax Professionals.
“But you can’t double dip,” says Jaeger. “If you take $5,000 in pre-tax dollars and you have two children in child care who qualify for a child care deduction, you can only take out $1,000 in remaining dependent care expenses before you hit that $6,000 maximum.”
Congress has been looking at expanding the child tax credit. Depending on your income bracket and the number of children you have, this change could provide a boost, says Kathy Pickering, chief tax officer at H.&R block.
“Many taxpayers have asked whether they should wait until the legislation is passed before filing their tax returns. Because the legislation is not yet final and we are unsure if or when it will be implemented, it is important to know that if passed, the IRS will calculate any adjustments due and automatically send payments. There is no need for petitioners to wait,” she said.
This may seem obvious, but to claim your child as a dependent, you must include your child’s Social Security number, so make sure all your children have one, says Tom O’Saben, director of tax content and government relations. at the National Association of Tax Professionals.
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