Child, dependent and adoption credits

You may be eligible for one or more of these tax credits for families:

Child credit. The maximum child credit is $2,200 for 2025. You may be able to claim it for each qualifying child under age 17 at the end of 2025. The credit begins to phase out when 2025 modified adjusted gross income (MAGI) reaches $400,000 for married couples filing jointly and $200,000 for head of household filers. The credit is refundable up to $1,700 per qualifying child.

Credit for other dependents. You may be able to claim a credit of up to $500 for each qualifying dependent other than a qualifying child (such as a dependent child over the age limit or a dependent elderly parent). This credit is subject to the same income-based phaseout as the child credit, but it’s not refundable.

Child and dependent care credit. For children under age 13 or other qualifying dependents, you may be eligible for a credit for a portion of your 2025 dependent care expenses. For middle-income-and-higher taxpayers, the credit generally equals 20% of the first $3,000 of qualified 2025 expenses for one child or 20% of up to $6,000 of such expenses for two or more children. So, the maximum 2025 credit for these taxpayers generally will be $600 for one child or $1,200 for two or more children. But you can’t claim the credit for expenses reimbursed through an employer-sponsored child and dependent care Flexible Spending Account.

Adoption credit. If you incurred eligible adoption expenses in 2025, you may qualify for the adoption credit. The maximum credit per child is $17,280 for 2025. It begins to phase out at MAGI of $259,190, regardless of filing status. New for 2025, up to $5,000 of the credit is refundable. Any nonrefundable portion can be carried forward for up to five years.

Higher education credits

If you had a child in college in 2025, you may be eligible for one of these credits:

American Opportunity credit. This credit covers 100% of the first $2,000 of tuition and related expenses and 25% of the next $2,000 of expenses. The maximum credit, per student, is $2,500 per year for the first four years of postsecondary education in pursuit of a degree or recognized credential.

Lifetime Learning credit. If you paid postsecondary education expenses that don’t qualify for the American Opportunity credit, check whether you’re eligible for this credit (up to $2,000 per tax return).

Both a credit and a tax-free Section 529 savings plan or Coverdell Education Savings Account distribution can be taken as long as expenses paid with the distribution aren’t used to claim the credit. However, income-based phaseouts also apply to these credits. They begin to phase out at MAGI of $160,000 for joint filers and $80,000 for heads of household. If you don’t qualify for one of the credits on your tax return because your income is too high, your child might.

Maximize your tax savings

Child, dependent, adoption and education tax credits can provide significant tax savings, but the rules are complex. If you’d like help determining which family-related credits you may qualify for on your 2025 return, contact us. We can help ensure you maximize your tax savings from these and other tax breaks you’re eligible for.

There are many rewards for taking care of an elderly relative. They may include feeling needed, making a difference in the person’s life and allowing the person to receive quality care. In addition, you could also be eligible for tax breaks. Here’s a rundown of four of them:

1. Medical expenses. If the individual qualifies as your “medical dependent” and you itemize deductions on your tax return, you can include any medical expenses you incur for the person along with your own when determining your medical deduction. The test for determining whether an individual qualifies as your “medical dependent” is less stringent than that used to determine whether an individual is your “dependent,” which is discussed below. In general, an individual qualifies as a medical dependent if you provide over 50% of his or her support, including medical costs.

However, bear in mind that medical expenses are deductible only to the extent they exceed 7.5% of your adjusted gross income (AGI).

The costs of qualified long-term care services required by a chronically ill individual and eligible long-term care insurance premiums are included in the definition of deductible medical expenses. There’s an annual cap on the amount of premiums that can be deducted. The cap is based on age, and in 2024 goes from $470 for an individual age 40 or less to $5,880 for an individual over 70.

2. Filing status. If you aren’t married, you may qualify for “head-of-household” status by virtue of the individual you’re caring for. You can claim this status if:

• The person you’re caring for lives in your household,
• You cover more than half the household costs,
• The person qualifies as your “dependent,” and
• The person is a relative.

If the person you’re caring for is your parent, the person doesn’t need to live with you, so long as you provide more than half of the person’s household costs and the person qualifies as your dependent. A head of household has a higher standard deduction and lower tax rates than a single filer.

There are requirements for determining whether your loved one is a “dependent.” Dependency exemptions are suspended (or disallowed) for 2018 through 2025. But even though the dependency exemption is currently suspended, the dependency tests still apply when it comes to determining whether a taxpayer is entitled to various other tax benefits, such as head-of-household filing status.

For an individual to qualify as your “dependent,” the following must be true for the tax year at issue:

• You must provide more than 50% of the individual’s support costs,
• The individual must either live with you or be related,
• The individual must not have gross income in excess of an inflation-adjusted exemption amount,
• The individual can’t file a joint return for the year, and
• The individual must be a U.S. citizen or a resident of the U.S., Canada or Mexico.

3. Dependent care credit. If the cared-for individual qualifies as your dependent, lives with you and physically or mentally can’t take care of him- or herself, you may qualify for the dependent care credit for costs you incur for the individual’s care to enable you and your spouse to go to work.

4. Nonchild dependent credit. For 2018 through 2025, the Tax Cuts and Jobs Act (TCJA) established a $500 federal income tax credit for dependents who don’t qualify for the Child Tax Credit. A dependent parent can make you eligible for this $500 credit. However, your parent must pass the aforementioned gross income test to be classified as your dependent for purposes of this credit. You must also pay over half of your parent’s support.

The credit is phased out for taxpayers with adjusted gross income (AGI) above $200,000 ($400,000 for a married couple that files jointly). The credit is reduced by $50 for every $1,000 that your AGI exceeds the applicable threshold.

Contact us if you’d like to further discuss the tax aspects of financially supporting and caring for an elderly relative.