Tax Tips for Parents: Save Money with Child Tax Credits

Families, who have children younger than the age of 18 as their dependents, can claim the children as dependents and receive child tax credits. This applies for single parents and for married couples. Dependent children may be stepchildren, grandchildren, or children in foster care.

Child Tax Credits allows single filers with gross income up to a level of $75,000-married parents up to a level of $110,000-, to reduce their tax burden by up to $1,000 for each child they have as a dependent. Children who have not lived with their parents for at least half of the year will not qualify.

Families with three or more children will qualify for child tax credits, up to a maximum of $9,000, if the children are all under the age of thirteen, or need special care because of a mental or physical disability.

A single parent or couple with a child who is in college or university may claim child tax credits under the Hope/American tax credit program. Each eligible student who is in college or university qualifies for a maximum tax credit of $2,500 per year. The student must be enrolled at least half-time in a program that will lead to a bachelor’s degree or equivalent qualification. Families with an income of $180,000 or less, with up to three students who are in university can qualify for a maximum total of $7,500 in child tax credits.

A single parent or couple may pursue an adoption. In the United States, 5-10% of child adoptions are by a single parent. If a parent is successful with their adoption, they can apply child tax credits to their gross taxable income because of the adoption. A single parent or married couple who adopt a child may claim a one time tax credit of up to $12,150 in the year in which the adoption took place.

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Child tax credits are more of a benefit to a parent than tax deductions. Dollar for dollar, a tax credit of $1000 allows a parent to save more money than a tax deduction of $1000. Tax deductions work by reducing the gross (taxable) income of a single parent or couple. Tax credits lessen the amount that has to be paid in taxes because they are actually subtracted from the total sum owed in taxes.