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, you may qualify for several tax breaks. 

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. For tax year 2021 (returns filed in 2022), the CTC was worth 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, which means means you can 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 you can work or search for a job, you may be eligible for a tax credit worth up to 50% of qualifying child care expenses.

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 can get depends on your adjusted gross income (AGI) and the number of dependents you claim.   

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.

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) and Lifetime Learning Credit are two main examples. Learn more.

Student loan interest deduction

Is your dependent a college student? If you meet all the requirements, you can claim 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.

Health insurance premiums deduction

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

This article was last updated on 4/22/2022.

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