Tax Breaks for Parents in 2022

Tax Breaks for Parents in 2022

Kids are expensive. Very expensive, actually. Everything from food & clothing to sports gear, activities, and more. Not to mention the massive investment of a college education. Fortunately, there are plenty of ways you can get a lot of that money back at the end of the year if you’re willing to do some extra tax work–or better yet–hire a CPA to do it. What are the best tax deductions for parents? What are some easy tax deductions parents can make in 2022? Find out now. 

Child and dependent care tax credit 

Unfortunately, the majority of households in this decade are dependent on two incomes. Americans every year are required to place their child in some sort of daycare or babysitting situation. The problem is the cost of child care and the hidden costs surrounding it–like transportation–can sometimes outweigh the value of the second stream of income. The effect of this specific issue, however, can be lessened by taking advantage of the child and dependent care tax credit. 

In most cases, up to 35% of $3,000 spent on child care can be claimed, and up to 35% of $6,000 if you have more than one dependent. More recently in 2021 and 2022, this number has gone up to 50% of $8,000, or $16,000 if you have more than two dependents. Definitely consider this as it could save you quite a lot of money depending on your income; the higher your household earnings, the less you can claim. 

Child tax credit

If your modified adjusted gross income is less than $75,000 as a single filer, $112,500 as head of household, or $150,000 as spouses filing jointly, you could receive up to $3,600 per child. One of the benefits of this is that the child tax credit is not considered taxable income, so you won't have to worry about paying anything back.

American opportunity credit

If you are a parent who pays for your child’s college tuition and claim them as a dependent, you can claim the first $2,000 spent on tuition, books, and supplies. On top of that, you can claim 25% on the next $2,500, bringing the total claimable amount up to $2,500. Please note that transportation costs, room and board, food, and all other living costs do not count towards this credit and cannot be claimed. You can claim the full amount if you make less than $80,000 if you’re filing singly, and less than $180,000 if filing jointly. 

Student loan interest deduction

If your modified adjusted gross income as a single filer is less than $70,000, or double that if filing jointly, you can deduct the maximum amount of $2,500. Unlike the American opportunity credit, room and board, transportation, and other education expenses are not considered exempt from this deduction. As long as you used the loan for qualified education expenses, you can deduct it. 

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