6 Tax Benefits of Having a Child: Credits and More

The IRS offers a number of tax benefits that support families. These opportunities can help you keep more of your income and plan more effectively for your family’s future. But the rules can be nuanced. Eligibility may depend on your income level, filing status and the age of your child. A financial advisor can help you assess these benefits, prepare documentation and develop a broader financial plan to support both your immediate needs and long-term goals as a parent.

Having a child opens the door to several tax benefits that can significantly reduce your federal income tax liability. These benefits range from credits that directly lower your tax bill to deductions that reduce your taxable income. Let’s break down the most common tax benefits of having a child and how to take advantage of each.

The child tax credit is one of the most well-known tax benefits for parents. For the 2024 and 2025 tax years, eligible taxpayers can receive up to $2,000 per qualifying child. Up to $1,700 of that amount may be refundable as the additional child tax credit. This means you could receive a refund even if you don’t owe any taxes.

To claim the CTC, you must provide your child’s valid Social Security number, they must also live with you for more than half the year, and be able to claim them as a dependent on your tax return. The credit begins to phase out for individuals with a modified adjusted gross income (MAGI) over $200,000 (or $400,000 for married couples filing jointly.) You’ll claim the CTC using Schedule 8812 on your tax return.

The child and dependent care credit is available for working taxpayers who pay for child care in order to work or look for work. It covers care for children under age 13 and allows you to claim up to $3,000 in expenses for one child or up to $6,000 for two or more. 

The credit is worth up to 35% of those expenses, depending on your income. Eligible care includes daycare, preschool, before- and after-school programs, and summer day camps. 

Families with a stay-at-home parent, such as a stay-at-home mom, generally do not qualify since the credit only applies if care is needed to work or seek employment.

To claim the credit, you must provide the care provider’s name, address and taxpayer identification number, and file Form 2441 with your tax return. The credit is nonrefundable, meaning it can reduce your tax bill but won’t result in a refund if you owe no tax.

The earned income tax credit is a refundable credit that benefits low- to moderate-income working families. The available credit increases significantly if you have children. For the 2024 tax year, a family with three or more qualifying children could receive up to $7,830, depending on income. For the 2025 tax year, that number rises to $8,046.

To qualify, you must have earned income from employment or self-employment and meet certain income limits. You must also have a qualifying child who lives with you for more than half the year. You must use Form 1040 to claim the EITC. The IRS provides an EITC Assistant tool online to help determine eligibility.

If you’re paying for a qualifying child’s college education, you may be eligible for education-related tax credits. The American opportunity tax credit (AOTC) provides up to $2,500 per eligible student for the first four tax years of postsecondary education. The lifetime learning credit (LLC) offers up to $2,000 per tax return for qualified education expenses, including part-time and graduate programs. You should note that the AOTC is partially refundable bur the LLC is not.

To claim either credit, the student must be enrolled at an eligible institution, and you must include Form 1098-T, which is issued by the school. These credits are claimed using Form 8863. Eligibility is based on income, enrollment status and whether the student is claimed as a dependent.

While personal and dependent exemptions were eliminated under the 2017 tax reform law, having a child can still impact your tax filing through your filing status. If you’re unmarried and have a qualifying child, you may be eligible to file as Head of Household. This offers a higher standard deduction and lower tax brackets compared to filing as Single.

To qualify for head of household status, your child must live with you for more than half the year. You must also pay more than half the cost of maintaining the home. This filing status alone can lead to significant tax savings, especially for single parents.

Although 529 plan contributions are not deductible on your federal tax return, many states offer state income tax deductions or credits for contributions to a qualified 529 college savings plan. These plans allow parents to grow savings tax-free and withdraw funds for qualified education expenses without paying taxes on the earnings.

Each state sets its own rules, and some require you to contribute to the in-state plan to claim the deduction. You can check with your state’s tax authority or a financial advisor to determine whether this benefit applies to you and how much you can deduct.