Tax Benefits for Dependents

While it can be difficult for children to stay in their own homes during winter or summer break or when taking online classes from home, they can also prove to be a blessing when it comes time to file taxes.

Tax reform eliminated the dependency exemption. However, you still have tax benefits that you can use to maximize your tax refund for dependent children and their families.

We’ll help to explain the tax benefits of dependents. But don’t worry if you forget these rules when it comes time for tax. Based on your answers, we will ask you a few questions about yourself and determine the tax credits and deductions you are eligible for.

You can also connect via video to a TurboTax Live Tax expert with 12 years of experience.

Child tax credit: You might be eligible for the Child tax credit, a tax reduction you receive for dependent children. Beginning in the tax year 2021, the Child Credit under the American Rescue Plan was increased from $2,000 to $3,000 for qualifying children over six years of age and up to $3,000. For qualifying children under six years old, the credit will be doubled to $3,000. This credit will become available to families with children under 17 for the first time. The full credit will be available if your income falls below $150,000 for married couples filing jointly, $75,000 for singles, or $112,500 for the head of household.

Families that earn more than the modified adjusted income of $3,000 or $3600 may not be eligible for the $3,000 credit. However, they can still claim the child tax credit of up to $2,000 under the existing tax provision. This credit is available for qualifying children under 17. Individuals earn up $200,000, and married couples earn up to $400,000. are still eligible for this credit amount.

Eligible families can receive an advance payment of the 2021 Child Credit up to $300 per child under 6 years old and $250 per child 6 years and older. These payments are not part of your 2022 refund and may be sent in advance.

Other Dependent Credit If you aren’t eligible for the Child Credit, but your child is older than 17, or you care for a friend, then you might still be eligible to claim the Other Dependent Credit up to $500 per person. If your adjusted gross income exceeds $200,000, or $400,000 for married couples filing jointly, the credit will begin to fade.

Dependent and Child Care Credit: Childcare can be expensive. Uncle Sam can help with the cost. You can claim the Child & Dependent Care Credit if you work or are actively looking for work and pay childcare for your dependent under 13 years of age (no limit if you’re disabled). You can claim the Child and Dependent Care Credit for all expenses, including private kindergarten, private after-school programs, daycare, and summer and winter camp.

Based on your childcare expenses, this credit reduces your taxes dollar for dollar. For the tax year 2021, the American Rescue Plan made major changes to Child and Dependent Care Credit.

• The maximum expense limit was increased from $3,000 per qualifying person to $8,000, and $6,000 for more than one qualified individual to $16,000
• The credit percentage increased from 35% to 50% of the expenses to allow maximum credit up to $8,000 ($16,000 x 50).
• The income phase-outs have increased, but there is still an income where credit is completely phased off. The credit was previously reduced for incomes above $15,000. The credit is reduced at an adjusted gross income greater than $125,000 for the tax year 2021 and phased out at $438,000.
• The credit is fully refundable for the tax year 2021. This means you can get the credit even though you don’t owe taxes.