If you’re a parent in the state of California, then the following information below will highlight all you need to know about some of the most common tax deductions for parents, such as the Child Tax Credit, the Child and Dependent Care Credit, and the Earned Income Tax Credit.
1. Child Tax Credit
The Child Tax Credit is a tax credit worth up to $2,000 per qualifying child aged 16 or younger at the end of the year. For other qualifying dependents, there is a $500 nonrefundable credit. Considering this is defined as a tax credit, this means that your tax bill is reduced on a dollar-for-dollar basis. Additionally, it is important to note that for the Child Tax Credit, up to $1,400 is refundable – reducing your tax bill to zero, and providing you with the opportunity to receive a refund on anything left over.
To qualify, you are able to take full advantage of the credit – but this is only if your modified adjusted gross income is under:
- $400,000 for married filing jointly
- $200,000 for everybody else
2. Child Care and Dependent Care Credit
The Child and Dependent Care Credit is a tax credit that is able to get you 20-35% of up to $3,000 of child care as well as similar costs for a child under the age of 13, an incapacitated spouse or parent, or another dependent so that you are able to work. Also note that there is up to $6,000 of expenses for two or more dependents.
For higher income earners, the percentage of allowable expenses decreases. This means that the value of the credit will also decrease, however it does not disappear completely. Additionally, the Child and Dependent Care Credit in nonrefundable – meaning that your tax bill can be reduced to zero, but you will not receive a refund on anything left over from the credit.
To qualify:
- A dependent child must be 12 or younger at the time the child care is provided.
- Spouses and other dependents do not have an age requirement. However, you must note that the IRS states they must have been physically or mentally incapable of self-care, and must have lived with you for more than half the year.
- If you’re married, you must file as married filing jointly.
- You must have earned income. Investment or other dividend income does not count.
- You must provide the care provider’s name, address and Taxpayer Identification Number (i.e. Social Security Number or an Employer Identification Number).
3. The Earned Income Tax Credit
Lastly, the Earned Income Tax Credit is specifically designed for working consumers with low annual incomes. In order to qualify, you have to file a tax return (even if you don’t owe tax and are not legally obligated to file a return), you must have at least $1 of earned income (note that pensions and unemployment do not count), your 2020 investment income must be $3,650 or less, and you cannot file as married filing separately.
The table highlighted below displays the maximum credits and maximum income allowed before losing the benefit.
2019 Tax Year Earned Income Tax Credit (for taxes due in April 2020)
| Number of Children | Maximum Earned Income Tax Credit | Max Earnings, Single or Head of Household | Max Earnings, Joint Filers |
| 0 | $529 | $15,570 | $21,370 |
| 1 | $3,526 | $41,094 | $46,884 |
| 2 | $5,828 | $46,703 | $52,493 |
| 3 or More | $6,557 | $50,162 | $55,952 |
2020 Earned Income Tax Credit (for taxes due in April 2021)
| Number of Children | Maximum Earned Income Tax Credit | Max Earnings, Single or Head of Household | Max Earnings, Joint Filers |
| 0 | $538 | $15,820 | $21,710 |
| 1 | $3,584 | $41,756 | $47,646 |
| 2 | $5,920 | $47,440 | $53,330 |
| 3 or More | $6,660 | $50,954 | $56,844 |
All in all, not only does an error on your tax form delay the EIC part of your refund – sometimes for several months – but it also means the IRS could deny the entire earned income credit. If so, professional tax accountants such as Robert Hall & Associates can provide with you with the necessary tax preparation help. We’ll be able to help with all aspects of your tax return, such as making sure your tax return is filed properly. This way, you will be able to benefit from all the deductions available to you as a parent!
