Filing your taxes can be very confusing — especially if you are claiming your newest little one as a dependent for the first time. But if you know the tax breaks you qualify for, your refund could be just the cash you need to fill the gaps in your family’s budget.
Most parents are relying on getting some money back this tax season to help make ends meet. In fact, 38% of moms plan to use their tax credit to chip away at their family’s debt, according to a recent What to Expect survey. Another 37% say they hope to pay for home expenses, 31% plan to use it to buy something for their child and 20% will pay for childcare.
But how can you be sure you’re not leaving money on the table this tax season? There are a few ways to boost your refund that all parents should know. Certified tax professionals share their best tips on how to receive the money that’s rightfully yours this tax season.
5 ways to maximize your tax credits as a parent
1. Claim a dependent
Claiming a dependent on your tax return can have several tax-related benefits. But what does it mean to claim a dependant?
A dependent is defined by the IRS as someone who relies on someone else for financial support. This can include minor children or other relatives. You can claim as many dependents as you want on your tax return, as long as they meet the IRS guidelines for dependents.[1]
While it’s hard to quantify exactly how much a dependent is worth on your taxes, each dependent you claim lowers your taxable income. This is because they help you qualify for certain credits.
Let’s start with the Child Tax Credit. This credit gives families a tax break of up to $2,000 per child. To qualify for the credit, the child must meet certain criteria, such as being under the age of 17 at the end of the year; be your qualified dependent; and have lived with you for more than half the year. For new babies, as long as they’re born sometime during the previous calendar year (even Dec. 31) they qualify for this credit.[2]
The Credit for Other Dependents is another option. This covers any dependent, regardless of age, and allows families to reduce their tax liability by $500 per eligible dependent.[3]
If you don’t qualify for these credits, there could be a few reasons. Your child or dependent may not meet the criteria, or you might be above the earnings cap. (No more than $200,000 or $400,000 if filing jointly.)
If you’re in a co-parenting situation, claiming a dependent is a bit more complicated. The custodial parent, or parent with whom the child has lived for a longer period during the year, should claim the dependent. However, the custodial parent can relinquish the right to claim a dependent on their tax return and transfer that right to the noncustodial parent.
2. Factor in unpaid maternity leave
If you took unpaid maternity leave, it will lower your taxable income and you may qualify for tax credits you wouldn’t otherwise qualify for.
A short-term disability policy may also cover your maternity leave, and it definitely factors into your taxes. If you purchase the policy yourself, the benefits are not taxable. But if your employer purchases the policy on your behalf, you must pay taxes on those benefits.
These taxes can be confusing because they require you to know the formal payment process for your leave and not every employer is fully transparent about this when you apply to take leave. It could help to consult an accountant to help you navigate this information.
3. Deduct the cost of fertility treatments
Fertility treatments can be expensive. In fact, one study from the National Institute of Health found that median, per-person costs ranged from $1,182 for medications only, to $24,373 for in-vitro fertilization (IVF).[4] This is another area that can help you come tax time since you can deduct certain medical expenses.
If you itemize the cost of IVF procedures, intrauterine insemination (IUI) proceduresand medications related to fertility treatments, you could qualify for a larger tax return, says Michael J. Garry, CFP and founder and CEO of Yardley Wealth Management in Yardley, PA. This means the government would pay you back for a portion of the costs.
It could be helpful to work with an accountant to take advantage of policies like this. They will help determine if your expenses are high enough to qualify for a refund.
4. Contribute to a tax-deductible savings or investment account
Another way to get the most out of your money this tax season? Contribute to a tax-advantaged education savings plan, such as a 529 college savings plan. Some states offer tax deductions or credits for contributions.
If you have a high-deductible healthcare plan, be sure to use your flexible spending account (FSA) or a dependent care FSA. Both allow you to make pre-tax contributions directly from your employer (before this money hits your bank account). This then lowers your taxable income.
“Look to see if there are savings mechanisms you can take better advantage of," Gary suggests. This could include saving in an IRA or Roth IRA and saving in 529 plans to help pay for college. “Some states allow state income tax deductions for contributions," he adds. "All these things can make filing next year less painful.”
5. File your taxes, even if you don’t have to
If you earned less than $13,850 last year, (the standard deduction for 2023), you aren’t required to complete a tax return. But that doesn’t mean you shouldn’t.
“Even though a taxpayer may not be required to file a tax return, they cannot receive a refund for withheld taxes and estimated tax payments paid unless a return is filed,” explains Janice Stoudemire, retired CPA and tax content specialist at UWorld CPA Review. “Also, to claim refundable tax credits such as the earned income tax credit, child tax credit, American opportunity tax credit and the premium tax credit, a taxpayer must file a tax return.”
Other advantages of filing a return include ensuring your future Social Security benefits will be accurate and providing documentation of your income to future creditors, such as a mortgage lender.
Survey methodology
The Everyday Health Group Pregnancy & Parenting Talk to Moms Monthly Poll was conducted by Everyday Health Group – Pregnancy and Parenting between January 25 and 29, 2024. We surveyed 453 women 18-45 who are currently pregnant or have at least one child up to 5 years old.
From the What to Expect editorial team andHeidi Murkoff,author ofWhat to Expect When You're Expecting. What to Expect follows strict reporting guidelines and uses only credible sources, such as peer-reviewed studies, academic research institutions and highly respected health organizations. Learn how we keep our content accurate and up-to-date by reading ourmedical review and editorial policy.
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