Parents: Claim all entitled tax credits

Raising kids is expensive. Between daycare, school supplies, extracurriculars, and college savings, the costs add up fast. But here's some good news: the IRS offers tax credits that can help ease the financial burden. These credits reduce your tax bill dollar for dollar, making them far more valuable than standard deductions.

Many parents miss out on credits they're eligible for simply because they don't know they exist or assume they won't qualify. Understanding which credits apply to your family could mean keeping hundreds—or even thousands—of extra dollars in your pocket. Let's break down the key credits available to parents in 2025.

Child, dependent, and adoption credits

Child credit

The child credit allows you to claim up to $2,200 per qualifying child under age 17. To qualify, your child must meet specific IRS criteria, including living with you for more than half the year and being claimed as your dependent.

This credit begins to phase out once your modified adjusted gross income (MAGI) reaches $400,000 for married couples filing jointly or $200,000 for head of household filers. Up to $1,700 per child is refundable, meaning you could receive a refund even if you don't owe taxes.

Credit for other dependents

Not all dependents qualify for the child credit. If you support a child over age 17 or care for an elderly parent, you may be eligible for the credit for other dependents. This provides up to $500 per qualifying dependent. The same income-based phaseout applies, but this credit isn't refundable.

Child and dependent care credit

If you pay for childcare so you can work or look for work, this credit can help offset those costs. For middle- and higher-income families, the credit equals 20% of up to $3,000 in expenses for one child or $6,000 for two or more children. That translates to a maximum credit of $600 for one child or $1,200 for multiple children.

Keep in mind that expenses reimbursed through an employer-sponsored Flexible Spending Account don't qualify for this credit.

Adoption credit

Adopting a child comes with significant expenses, but the adoption credit can help. For 2025, you can claim up to $17,280 per child for eligible adoption expenses. This credit begins to phase out at a MAGI of $259,190, regardless of filing status.

What's new? Up to $5,000 of the credit is now refundable. Any nonrefundable portion can be carried forward for up to five years, giving you flexibility if you can't use the full credit in one tax year.

Higher education credits

If you have a child in college, these credits can help reduce the cost of tuition and related expenses.

American Opportunity credit

This credit covers 100% of the first $2,000 in tuition and related expenses, plus 25% of the next $2,000. That's a maximum of $2,500 per student, per year, for the first four years of postsecondary education.

To qualify, your student must be pursuing a degree or recognized credential and enrolled at least half-time. Income-based phaseouts begin at $160,000 MAGI for joint filers and $80,000 for heads of household.

Lifetime Learning credit

If your child doesn't qualify for the American Opportunity credit, the Lifetime Learning credit might apply. This credit is worth up to $2,000 per tax return and can be used for any postsecondary education expenses, including graduate school or professional development courses.

The same income phaseouts apply, so higher earners may not qualify. However, if your income is too high, your child might be able to claim the credit on their own return.

Pairing credits with education savings accounts

You can claim an education credit and take a tax-free distribution from a Section 529 savings plan or Coverdell Education Savings Account in the same year. Just make sure the expenses paid with the distribution aren't the same ones used to claim the credit.

Don't leave money on the table

Tax credits for parents can add up to serious savings, but the rules are detailed and easy to misunderstand. Missing a credit you're entitled to means leaving money on the table—money that could go toward your family's future.

If you're unsure which credits apply to your situation or want to maximize your refund, we're here to help. At SD Mayer & Associates, we take the time to understand your unique circumstances and ensure you're claiming every credit you qualify for. Reach out today, and let's make sure you're getting the full benefit of these valuable tax breaks.