Raising a family costs money. However, there are also ways to save it, and going into this tax season, the Illinois CPA Society found 10 tax breaks that parents should know about.
According to a recent Consumer Affairs report, Illinois is the 18th most expensive state to raise children in. It costs an estimated $16,843 per year to raise a child in the state.
Here are the 10 ways to save, as identified by the certified public accountant group:
1. Child Tax Credit, worth up to $2,000 per qualifying child or dependent who has a valid U.S. Social Security number, per annual income limitations
2. Child and Dependent Care Credit, for parents who paid someone to take care of their child so they could work or look for work, worth up to $6,000 for two or more qualifying individuals and circumstances
3. Adoption Tax Credit, for parents who adopted a child through eligible international, domestic, private, or public foster care adoptions, worth up to $16,810 in qualified expenses for 2024 (those who received adoption benefits from employers could also exclude up to $16,810 of those benefits from their income), note that this credit is nonrefundable, so you can’t get back more than you owe in taxes
4. American Opportunity Tax Credit (AOTC), for parents with qualified education expenses paid for an eligible student for the first four years of higher education, worth up to $2,500 for each eligible student, per annual income limitations (if the credit brings the amount of tax owed to zero, 40% of any remaining credit amount – up to $1,000 – is refundable)
5. Student Loan Interest Deduction, for parents who incurred interest on loans for qualifying higher education, worth up to $2,500 (or the amount of interest actually paid during the year) for those eligible based on income
6. Earned Income Tax Credit (EITC), for qualifying low- and moderate-income workers and families worth $632 to $7,830, based on a variety of factors
7. Illinois EITC, which eligible recipients are automatically enrolled in on their Illinois tax and is calculated at 20% of a recipient’s federal credit
8. Illinois Child Tax Credit, for those who qualify for the Illinois EITC and have at least one qualifying child under age 12, calculated at 20% of the recipient’s Illinois EITC amount
9. Illinois K-12 Education Expense Credit, for those who paid more than $250 in expenses such as tuition, books, and lab fees, worth up to $750 and calculated as a 25% credit of a student’s qualifying education
10. Illinois 529 College Savings Plan Deduction, for parents who wish to lower their taxable income by making tax-deductible contributions up to $10,000 for individuals and $20,000 for joint filers to state-sponsored 529 plans (investments grow tax free while in the plan)
“While the costs of raising children will likely continue to rise, there are many tax credits and deductions available to help alleviate some of the financial burden,” said the Illinois CPA Society. “A CPA can help prepare and file your tax return to ensure all eligible credits and deductions are maximized.”