Millions of working families rely on family tax credits like the child tax credit (CTC) to support household bills like food, housing, childcare, and education.
Claiming these and other federal tax credits and deductions like the adoption credit and the Earned Income Tax Credit (EITC) can lower your tax liability or increase your refund amount.
4. Child and Dependent Care Tax Credit
The Child and Dependent Care Tax Credit (CDCT), for example, has remained unchanged for more than ten years. The maximum expense that can be used to calculate your credit amount is $3,000 (for one qualifying person) or $6,000 (for two or more eligible persons). The credit amount is also based on the percentage (20% to 35%) applied to your adjusted gross income.
Under current law, the credits are non-refundable and families are eligible for the following:
- 35% for taxpayers with adjusted gross income between $0 and $15,000
- 20% to 35% for taxpayers earning between $15,000 and $43,000
- 20% for those earning over $43,000 annually
What comes next for family tax credits
As this is an election year, both the Democratic and Republican presidential candidates have floated proposals that could enhance key tax breaks for families,.
But all else aside, temporary expansions to the CTC are slated to expire in 2026 unless Congress acts soon. As reported by Kiplinger, these changes will mean many families will get fewer tax credits and fewer children will be eligible.
With family tax credits as a pocketbook issue at the federal and state level, it’s important to stay informed about changes that can directly impact your household’s financial well-being.
To see if you’re eligible for some of these tax breaks, you can talk to a trusted certified financial professional or tax advisor.