Tax benefits of having a child: A guide for new parents

The average cost to raise a child to age 17 in the US today is more than $300,000. Fortunately, a range of existing and enhanced tax benefits can help you fund your children's upbringing by stretching your dollars further.

Using the following strategies can help you focus more on the many joys of raising your family and spend less time on the financial aspects of your children's lives as they mature.

Seven tax breaks for parents

Having a child may actually help to reduce your tax liability through various tax credits and deductions. Here's a list of seven tax breaks you may be able to claim when you file your next tax return.

1Child Tax Credit

As of 2025, the Child Tax Credit provides up to a $2,200 credit per qualifying child, depending on your income. Up to $1,700 of this credit is refundable, meaning you'll get this money as a tax refund if the credit amount is larger than any tax you owe.

Your child likely qualifies for this credit if they:

• Are under age 17
• Receive more than half their financial support from you
• Live with you for at least 6 months during the year
• Meet US citizenship requirements

Biological, step and adopted children qualify for the credit if they meet the criteria. This credit may also apply when claiming a foster child on taxes, as well as other dependents—including biological siblings or stepsiblings, nieces, nephews and grandchildren.

Are you eligible for the Child Tax Credit?

You can receive the full amount of the Child Tax Credit if your income is $200,000 or less. The limit is $400,000 if you file jointly, but you may be eligible for a reduced credit if your income exceeds these limits.

2Family Tax Credit

If your dependents don't meet the criteria for the Child Tax Credit, you may still be eligible for a $500 nonrefundable family tax credit. However, you must be able to claim the child as a dependent on your tax return and meet the income requirements.

Are you eligible for the Family Tax Credit?

You can use this IRS tool to learn whether your child or other dependent qualifies for either the Child Tax Credit or the family tax credit. To claim the full credit, your income must be $200,000 or less—or less than $400,000 if you file jointly. The credit decreases by $50 for every $1,000 your adjusted gross income, or AGI, exceeds these limits.

3Child and Dependent Care Credit

The Child and Dependent Care Credit, also known as the Daycare Credit, is designed to offset the cost of child care while you work or look for a job. Care may be provided in your home, or you can enroll your dependent in a qualified off-site program.

You can claim up to $3,000 in work-related expenses for one dependent or $6,000 for two or more dependents. The percentage of expenses you're allowed to claim is based on your AGI and ranges from 35% to 20% for lower incomes to higher incomes, respectively.

When claiming the Child and Dependent Care Credit, you must subtract any employer-based dependent care benefits from your expenses. If you're married but file separately, you may be ineligible for this credit.

Can you claim both the Daycare Credit and the Child Tax Credit?

You can claim both the Daycare Credit and the Child Tax Credit on your tax return if you meet the eligibility requirements for each one independently. The tax savings from these credits is designed to help families manage child care expenses.

4Earned Income Tax Credit

The Earned Income Tax Credit, or EITC, is a refundable tax break designed to help low- to moderate-income families. If eligible, you may claim a credit worth up to $8,046, depending on your income and how many qualifying children you have.

Who qualifies for the EITC?

To qualify for the EITC, the total of your earned and investment income must be below a certain threshold. For example, if you're married, file jointly and have three qualifying children, your combined earned income can't exceed $68,675. You also can't claim the credit if you received more than $11,950 in investment income during the year. Qualifying dependents generally must be younger than 19 at the end of the year. However, if a dependent has a disability, they qualify regardless of their age.

5Adoption Credit

If you're planning to adopt, you should first review the Adoption Credit. It can help offset up to $17,280 in qualified expenses incurred during the adoption process. Qualified expenses include a home study, travel expenses, adoption fees, attorney fees and court costs. This credit is refundable up to $5,000, and this amount is indexed for inflation. You can carry over any excess credit amount for up to 5 years, reducing your future tax liability. The refundable portion can't be carried forward.

Can you claim the Adoption Credit?

To be eligible for the full amount, your modified adjusted gross income, or MAGI, must be equal to or less than $259,190. You may qualify for a reduced credit with a MAGI of up to $299,190. However, individuals who adopt their spouse's child aren't eligible for this credit.

6Education credits

If you're the parent of a dependent student, you may be eligible to claim two tax credits—the American Opportunity Tax Credit and the Lifetime Learning Credit. Here are some general comparisons.