What we'll cover
Documents you'll need to file taxes
Tips to maximize your tax savings
When to report your teen's income
It's tax season, and on top of changing diapers, packing your child's lunch or getting them to soccer practice, you have to file your taxes. Let's reduce that stress: We'll walk you through how having children affects your tax filing, no matter their age.
Essential documents for filing taxes
In addition to the usual paperwork you're likely familiar with, like W-2s, you'll need to keep in mind a few more important pieces when filing.
Social Security cards
Having your Social Security card — and your childrens' cards — is crucial for filing your taxes as a parent. You'll need your child's Social Security number in order to claim them as a dependent and receive parental tax breaks like the Child Tax Credit (more on that later).
Read more: How a savings account can keep your finances in order.
Birth certificates
You'll need to verify your child's relationship to you to receive tax benefits. Having their birth certificate on hand is the easiest way to verify that they are, in fact, yours.
In the case you adopted a child, you're not required to attach adoption records with your return. Even so, you should keep these documents as part of your records — and hold on to any receipts or record of adoption-related costs.
Maximize tax savings
Being a parent can benefit your finances come tax season. Some tax breaks to keep in mind are:
Child Tax Credit
To claim the Child Tax Credit, your child will need to meet certain criteria, but most dependent children are eligible. For tax year 2023, the credit is worth $2,000 per dependent child if your modified adjusted gross income is below $400,000 for married couples filing jointly or below $200,000 for all other parents. If your income exceeds these limits, you may still receive a reduced credit. To claim the credit, enter your child's information on Form 1040 and attach a completed Schedule 8812 form.
Adoption Tax Credit
The Adoption Tax Credit can help to offset the costs of adopting a child, including legal fees and travel as part of the adoption process.
Child and Dependent Care Credit
If you are one of many parents who use a daycare or child care service, you may be able to claim those expenses under the Child and Dependent Care Tax Credit.
Education Tax Credits
Two education tax credits are available if your child is currently enrolled in higher education:
American Opportunity Tax Credit: up to $2,500 per eligible student
Lifetime Learning Credit: up to $2,000 for tuition and other educational expenses, including professional development
Being a parent can benefit your finances come tax season.
Student loan interest deduction
If your child has student loans, and more than $600 was paid on interest, the loan servicer will send a 1098-E form to file. You can claim the deduction if the loan is in your name, and you paid the interest. However, if you paid the interest for your dependent child and the loan is in their name, neither of you can claim the credit.
Tuition, fees and work-related education expenses are no longer tax-deductible.
Tax considerations for working teens
If your kid has started working, here are some helpful tips for your family's tax filings.
Reporting your teen's income
If your teenage child is working a job while living at home with your financial support, the amount they earn won't affect their dependent status. You can still claim your child as a dependent if they file their own return, but you should not claim their income on your own taxes.
Filing requirements
For tax year 2023, if your teen earned more than $13,850, they will need to file their own tax return. If they made income through dividends or interest that exceeds $1,250, they'll also need to file. Your child should file their own tax return if their employer withholds money from their paychecks for tax purposes. They may be owed their own refund. One more consideration: If your child makes more than $400 from self-employment like mowing lawns or reselling clothes for profit, they owe Self-Employment Tax and will need to file.
Work-related deductions
If your teenage child is self-employed, they should retain receipts for business-related expenses they want to deduct from their taxes.
Nanny tax: Federal employment tax obligations
You'll have some additional tax considerations if you employ a professional household worker.
Understanding the nanny tax
The IRS considers household employees to be people who work in or around your private residence as your employee, like cooks, housekeepers and nannies.
As their employer, you may need to pay Medicare and Social Security taxes if their income exceeds $2,600 in 2023. You'll need to file a W-2 and W-3 form, and they'll complete an I-9 to verify their eligibility for employment.
Nanny tax exemptions
If you don't control how these workers go about their business or what specific tasks they complete, then you are not considered their employer. Contractors who make occasional home visits or daycare workers don't qualify for the nanny tax.
Claim your parental perks
Being a parent comes with the benefits of loving your child and seeing the world through youthful eyes — come tax season, you can claim some financial perks, too.
