Raising a family in today's financially-strained economy is a challenge for many parents. With many families working outside the home to support their families, and cost of living expenses rising, many still find themselves struggling to make ends meet. There are definite benefits to raising a family in today's economy in the form of significant tax breaks. In comparison to a single person, families can save a significant amount of money in tax breaks. Here is a look at some of the tax breaks that are available to families in the United States.

Child Tax Credit
One of the more well-known tax credits for families is the Child Tax Credit. This tax credit is the equivalent of $1,000 per child, and there is no limit per family. Multiply the number of children under the age of 17 you have by the $1,000 per child credit, and that is the amount that will be deducted from your tax bill for the calendar year. In order to be eligible for the Child Tax Credit, married couples must have an annual gross income of less than $110,000. Individuals who are married and filing separately must make less than $55,000 and single parents less than $75,000 per year. The Child Tax Credit can help families receive a tax refund check instead of owing a tax balance.

Child and Dependent Care Credit
Another tax credit that is highly beneficial to American families is the Child and Dependent Care Credit. For families where both parents are working outside the home, or a single parent is supporting his or her family by his- or herself, a child and dependent care credit may be available. There are some restrictions and guidelines in order to be eligible for this credit. You are allowed to file for a credit of up to 35% of your total annual child and dependent care costs or a maximum of $3,000 for one child and $6,000 for two or more children. Additionally, the child or dependent must have lived with you for more than half of the calendar year and be put in the care of another so that you can work or look for work.

Families can opt for a $3,800 tax exemption per qualifying child. In order to be considered a qualifying child, parents must provide more than 50% of that child's care during the year. The child must live with you for at least half the year, be under the age of 19 if not enrolled in college, or under 24 years old if enrolled in a college or university for at least five months of the calendar year. Exemptions can help tax-paying families reduce the amount of tax they pay throughout the year.

Adoption Credits
Family tax credits are not just for natural parents, but adoptive parents as well. Du e to the high costs associated with adoption, there is an adoption tax credit. The 2012 adoption tax credit is $12,650 per child and can help to reduce the amount of taxes you owe for a calendar year. It is important to note that in contrast to the 2010 and 2011 calendar year, when you file taxes for 2012, the adoption tax credit is not refundable. Essentially, this tax credit can reduce the amount of tax you owe, but it will not contribute to a tax refund.

American Opportunity Credit
Many parents of college students are eligible for tax credits as well. The American Opportunity Credit is a tax credit for parents helping their children obtain a college education. The maximum credit per student is $2,500. As with the other tax credits, the American Opportunity Credit does have some restrictions and guidelines. In order to be eligible for this tax credit, individuals must make less than $80,000 per year and families less than $160,000 combined per year.

The Bottom Line
While raising a family is today's modern age is costly, there are tax breaks available. You are not limited to the amount of credits you can collect, as long as you are eligible for each. It is vital that you follow the guidelines for each very carefully, and if you have any questions regarding credits that you are personally eligible for, a tax professional is the best frame of reference.

Related Articles
  1. Investing

    Why to Buy Term Life Insurance with a Conversion Option

    Why you should always purchase a term life insurance policy that allows for an unrestricted conversion option.
  2. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  3. Investing

    How Does Depreciation Reduce My Tax Bill?

    How the depreciation tax rule can assist real estate investors.
  4. Investing

    How Does a Tax-Free Exchange Work?

    In regards to the sale of property, particularly in real estate, a 1031 exchange is increasingly being recognized for its tax benefits to investors of all levels.
  5. Taxes

    What IRS Form 1023 Is Used For

    To be treated as a tax-exempt organization, start by filling out this form.
  6. Taxes

    Late with Your Taxes? Grab IRS Form 4868

    Fill out this form to get a few more months to file your tax return. But remember, April 15 is still the payment due date if you owe taxes.
  7. Professionals

    Advisors: Warn Clients About These Audit Triggers

    There are several factors that may increase the risk of an audit, especially with high-net-worth clients.
  8. Entrepreneurship

    What's the Purpose of IRS Form 1065?

    Business partners need the information on this form to complete their own tax returns. Here are the details.
  9. Economics

    The Biggest Items Obama Is Still Missing From His Mandate

    Learn how the biggest items missing from Obama's mandate include various forms of tax reform and closing the Guantanamo Bay prison in Cuba.
  10. Professionals

    How Advisors Can Help Expectant Couples

    Bringing a child into the world makes parents more acutely aware of their finances. Here's how advisors can help expectant couples prepare.
  1. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>
  2. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  3. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>
  4. What tax breaks are afforded to a qualifying widow?

    The tax breaks accorded to qualifying widows or widowers include being able to use a tax filing status that allows for a ... Read Full Answer >>
  5. How is income taxed on prorated salary?

    Since yearly income is viewed by the Internal Revenue Service (IRS) as the total amount of income a person has made over ... Read Full Answer >>
  6. How can I tell which of my business expenses count as write-offs?

    Any basic, reasonably necessary expenses incurred in running a business can be considered possible write-offs. Such expenses ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!