As the year winds down and visions of sugarplums and tax refunds dance in our heads, it’s worth taking a look at the ways your kids affect your taxes. From the child tax credit to the “kiddie tax,” let’s explore the 2025 guidelines so you can maximize the tax advantages.
Some tax credits are refundable, which means they are owed to you even if your tax due is zero—thus, they may provide or increase your refund.
A non-refundable credit can bring your balance to zero, but does not result in an additional refund.
Six Tax Breaks for Parents
Most of the tax benefits from having a child come from credits, which are applied to your taxes owed. But if you are itemizing deductions, you may be able to reduce your taxable income.
Medical and Dental Expenses
If you are itemizing deductions, you may be able to deduct unreimbursed medical expenses. Anything covered by insurance or another method of reimbursement is not eligible. Additionally, these expenses must exceed 7.5% of your adjusted gross income (AGI). Once that threshold is met, you may claim the remaining amount above 7.5% on form Schedule A for an itemized deduction.
College Savings Plans
By contributing to a qualified tuition program, or 529 plan, for your child’s higher education expenses in the future, you can get a tax break while also setting your child up for an easier future. Earnings in a QTP accumulate tax-free, and distributions are not taxable when they are used for qualified higher education expenses.
Talk to your tax preparer—they may have a referral network of financial professionals who can help you set up a 529 plan for your child.
Earned Income Tax Credit (EITC)
This refundable credit reduces the tax burden on low-income filers and families.
Folks without children may also qualify for this credit, but the income threshold is lower ($19,104 single or $26,214 filing jointly) and the max credit is $649. Larger families have a higher threshold and larger credit maximum.
Take a look at the IRS’s 2025 EITC table below:
| Children/Relatives Claimed | Max AGI for single filers | Max AGI for joint filers | Maximum credit |
| Zero | $19,104 | $26,214 | $649 |
| One | $50,434 | $57,554 | $4,328 |
| Two | $57,310 | $64,430 | $7,152 |
| Three or more | $61,555 | $68,675 | $8,046 |
Child Tax Credit (CTC)
The child tax credit is a non-refundable credit that helps reduce your tax liability. For each qualifying child, you may receive a credit of up to $2,200. If you have a low tax liability, you may qualify for an additional credit, called the Additional Child Tax Credit, of up to $1,700 per qualifying child.
What qualifies a child? They must be under 17 by the end of the tax year, live with you for more than half the tax year, be claimed as a dependent on your tax return, not provide more than half their own support during the year, and a few other specifics you can find on the IRS website.
Child and Dependent Care Credit
If you rely on childcare so that you and your spouse can work, this non-refundable credit helps offset the cost of that care. And it’s more than just daycare that can qualify—you can claim this credit for nursery school, after-school programs, day camps, preschool, and in-home babysitting.
The amount of the credit changes based on your AGI, with a maximum limit of $3,000 in qualifying expenses for one child/dependent, or $6,000 for two or more children/dependents.
Adoption Credit
Having kids is expensive—let alone adopting them! This credit helps offset the cost of adopting a child, crediting up to $17,280 in expenses, including court costs, agency fees, and travel expenses. The credit applies to international, domestic, private, or public foster care adoptions.
Other Considerations for Parents
We’ve covered the most common credits and deductions that parents can use to reduce their tax burden, but there’s one more topic to touch on: Kiddie Tax.
Despite its cute name, the kiddie tax packs some pretty serious tax consequences. This tax is designed to make sure that parents don’t evade their own tax liability by shifting investment gains to their child’s name.
This tax doesn’t apply to earned income from your teen’s summer job or your college student’s internship—rather, it focuses on unearned income such as dividends, interest, and capital gains.
For 2025, we’re looking at this breakdown:
| Unearned Income | Tax Rate |
| First $1,350 | Tax free |
| Second $1,350 | Child’s tax rate |
| Anything above $2,700 | Parents’ tax rate |
To avoid the higher tax rate, choose investments for your children strategically to keep their unearned income below the $2,700 threshold.
Next Steps for Tax Season
As the year wraps up, note any of these credits, deductions, or special circumstances that apply to your family so you can discuss them with your tax preparer. While there’s not a lot of time left to make changes for the 2025 tax year, getting a head start on 2026 with a free tax consultation is a great way to set yourself (and your family) up for an easier time next tax season.