Hyden, Miron & Foster, PLLC Law Blog

Monday, March 20, 2017

Tax Savings for Parents

What tax breaks could I receive for childcare and education?

Raising a child is a costly expenditure.  Parents today will spend roughly $13,000 per year on their child.  Between child care, food, clothing, activities, and the like, parents can rarely catch a break—but during tax season, there are several ways in which parents can save.  Our Arkansas tax lawyers at Hyden, Miron, & Foster, PLLC, offer a list of tax breaks that could help parents below.  Contact our office for individualized assistance with your tax needs.

Child and Dependent Care Credit

If you and your spouse both work or are looking for work and have children under the age of 18, you could receive a substantial tax credit for your child care expenses.  Parents can claim a maximum of $3,000 in child care expenses for one child, and double for more than one.  You will need to list the daycare center or caregiver along with an employment ID number or Social Security number when filing.  

Dependent Care Flexible Savings Account

Another way to save considerably is with a Dependent Care Flexible Spending Account, or DCFSA.  You can enroll in a DCFSA through work.  Money will be deducted from your paycheck and set aside into a special account that you can use to pay for child care. By creating a DCFSA account, you can save up to 30% in taxes on the money you put in.  You are allowed to contribute a maximum of $5,000 per household.  Parents will often save more with a DCFSA account than they would by taking the Child and Dependent Care Credit.  Some parents may be eligible to still receive a partial Child and Dependent Care Credit even if they use a DCFSA.

Tax Credits for Parents Paying College Tuition

Parents of older children who are paying for their child’s college expenses can take advantage of two major tax breaks.  The American Opportunity Tax Credit allows eligible parents to deduct a maximum of $2,500 each year for their child’s first four years in college.  The Lifetime Learning Credit provides parents with a credit for 20% of the first $10,000 paid for higher education, with a maximum savings of $2,000.  Restrictions do exist, but these deductions can greatly assist parents already covering the immense costs of college tuition.

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