Key takeaways

• Filing status affects tax brackets, standard deductions, and credit eligibility for families.

• Credits like the Child Tax Credit, Earned Income Tax Credit, and care credits can reduce taxes or increase refunds.

• Accounts like those for dependent care and health expenses that are funded with pre-tax dollars can lower taxable income.

Being a parent involves a lot of money questions, and many can hit at tax time: What’s the best way to save on taxes? Which tax credits can I claim? Are my children my dependents?

Getting clear answers to those questions can take time, and the IRS says people already spend around 13 hours preparing their annual return.¹

Around a quarter of American households include children, according to 2023 data (the most recent available). It’s important to understand the ins and outs of the tax code, especially when you have a more complex situation like a family, to help find savings where possible.²

Which filing status is best for families?

The IRS has five filing statuses for people to choose from to submit their federal income tax return, and in general, your marital status is a good factor to start with.³ Families may find that each filer could take a different approach, though all members need to be aligned to meet all the requirements, such as around claiming children as dependents.

• Single: For people who are unmarried, divorced, or legally separated

• Head of household: For a single person who paid more than half of their own living expenses plus those of a qualified dependent

• Married filing separately: For a married person who decides not to file a joint return, or who would benefit from lower taxes by filing separately

• Married filing jointly: For a married person, or if a spouse died during the year

• Qualified surviving spouse (used to be known as Qualifying Widow or Qualifying Widower): For a person with a dependent child and whose spouse died within the past two years

Each filing status has different requirements and can affect the amount of tax paid overall, which tax credits qualify, and the amount of standard deduction that can be claimed, among other considerations.

Read more: What are the tax benefits of marriage?

Running different scenarios for multiple filing statuses through tax software or by consulting a tax professional can pay off. For example, filing as head of household can mean a higher standard deduction and wider tax brackets, though timing around the “unmarried” requirement could add complexity depending on each family’s situation.

Tap tax credits for families

Beyond picking a filing status, families will also need to calculate their adjusted gross income (AGI) to figure out which tax breaks they could be eligible for.

The median household income in America was $83,730 in 2024, though for tax purposes, “income” takes on a new meaning.⁴ AGI goes beyond just company wages and money from side gigs and self  -employment when determining income, also accounting for investment income and alimony payments, among other categories. The income figure can move when you contribute to specific adjustments like IRA contributions and student loan interest payments.

Some tax credits and deductions that can be beneficial for your tax return may have AGI requirements.

Child Tax Credit

Over 46 million taxpayers claim the Child Tax Credit each year, and it’s important to understand the how this credit could affect the bottom line of your return.⁵ The credit can unlock up to $2,200 in tax savings per qualifying child for the 2025 tax year, with a maximum of $1,700 possibly refundable — meaning that you can receive that amount as a refund even if you don’t pay taxes. However, there’s an income maximum of $200,000 ($400,000 for those filing jointly) to claim the Child Tax Credit, so higher earners may only be eligible for part of the credit with the income phase-out.⁶

Adoption Tax Credit

Those who added to their family through adoption in 2025 (or started the process during that year) could claim the Adoption Credit, which applies to a maximum of $17,280 per qualifying child for qualified adoption expenses. Starting in the 2025 tax year, $5,000 of the Adoption Credit is refundable, and the non-refundable portion can be carried forward for up to five years. Eligible costs that would go toward this credit include attorney fees, court costs, and adoption fees.⁷

In terms of income, people with a modified adjusted gross income of $259,190 or less can qualify for the full credit, while the amount is reduced with a modified adjusted gross income of between $259,191 and $299,189. If the amount is $299,190 or higher, the credit does not apply.⁸

Earned Income Tax Credit

The IRS believes that around 20% of eligible taxpayers are overlooking a valuable tax break: the Earned Income Tax Credit (EITC). On average, people received $2,916 from the EITC in 2024.⁹

The credit is focused on low- and moderate-income households to help lower owed taxes and possibly increase a refund. Family size, the amount of dependents, and whether people are disabled can all affect eligibility.¹⁰

The IRS has a free calculator dedicated to the EITC for people to see if they qualify.¹¹

Child and Dependent Care Tax Credit

Juggling work and childcare can be an ongoing balance for parents: Of married-couple families in 2024, nearly 50% had both spouses employed, while 23.4% had only one spouse employed.¹² 

For people who have paid a provider to take care of their child while they are at work or looking for work, the Child and Dependent Care Tax Credit is another tax break that can be applied. Programs like daycare, summer day camps, and after-school care are eligible expenses. The amount available for the credit adjusts based on the number of qualified individuals that the expenses cover. The limit is $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals; these can include a dependent qualifying child under the age of 13 when care was provided, or a spouse incapable of self-care and who lived with the filer during more than half the year.¹³

Pre-tax contributions can lower taxable income

Tax credits can help lower a family’s overall tax burden, though people looking to further maximize tax breaks can also consider housing money in tax-advantaged accounts to reimburse themselves for eligible family-related expenses.

Dependent care flexible savings account

Rising prices across the country have been top of mind for half of Americans (51%), according to Empower research, and families with younger children may be seeing an even bigger hit to their wallet. The cost of childcare has jumped 8% since June 2024, double the pace of overall U.S. inflation (4%).¹⁴

Similar to the Child and Dependent Care Tax Credit, a dependent care flexible savings account applies to expenses for both child care and elder care, including:¹⁵

• After-school programs

• Child care (including nanny and au pair)

• Day camps (such as summer camps)

• Preschool

• Adult / senior day care

Read more: Tax planning for the sandwich generation: How to minimize taxes before filing

The 2026 contribution limit for dependent care flexible spending accounts is $7,500 for single filers and married couples filing jointly (or a $3,750 maximum for married people filing separately). People make deposits via payroll deductions of pre-tax dollars, and then they can reimburse themselves by submitting receipts for qualified expenses. They can only be reimbursed for as much money as they’ve had transferred into the flex account (which may be less than the full planned contribution for the year).

Families who live in a higher cost of living area may only be able to cover a portion of their annual childcare costs even if maxing out the dependent care FSA, though every tax-advantaged dollar counts leading up to tax time.

Health savings accounts

Staying healthy is another area where money management comes into play, as American working families spent around $3,960 on health care in 2024, which included insurance premiums and out-of-pocket expenses.¹⁶

Families who leverage a health savings account — available for those who participate in high-deductible health care plans — can use pre-tax money to pay for eligible out-of-pocket health care expenses. These can cover medical treatments, prescription drugs, medical supplies, vision care, and some insurance premiums.

Read more: What can I use my HSA for?

Those who have high spending toward health care can also try another move on their tax return. People who choose to itemize their taxes (rather than take the standard deduction) can deduct qualified medical and dental expenses that amount to more than 7.5% of their AGI.

Save on taxes by saving for education expenses

Funding children’s education is the top financial goal for families that are dually employed with kids, according to Empower research. With the average cost of college in the U.S. sitting at more than $38,000 a year, families can look to tax and saving moves to help pay their way.¹⁷

529 education savings accounts

An investment account that’s focused on education savings, a 529 plan combines tax advantages (like potential tax-free growth) and an array of uses, including reimbursing eligible expenses (like tuition) and passing along the funds to other family should a person decide not to attend college.

Families may get a head start on saving by opening a 529 account as soon as a child has a Social Security number, and generally the plans have ways to allow relatives and friends to make deposits into the account, such as for birthday or holiday presents. Once expenses have occurred, another 529 benefit is that qualified withdrawals are free of federal taxes, though state taxes may apply.¹⁸

Tax credits for students

Two tax credits may also apply for people in your family enrolled in higher education, though there are strict requirements on who the credits are for and the nature of the eligible expenses. What the IRS considers a “student” also may differ from a taxpayer’s initial interpretation, so taxpayers should consult the IRS’s full criteria.¹⁹

• The American Opportunity Tax Credit (AOTC) can be up to $2,500 per eligible student and is partially refundable. The student must be enrolled half-time or more in at least one academic period of the year. Qualifying expenses include tuition and enrollment fees, along with course materials that may or may not be paid directly to the school.

• The Lifetime Learning Credit (LLC) can be up to $2,000 per tax return and is a non-refundable credit. The student must be enrolled in one or more courses in at least one academic period of the year. Qualifying expenses are similar, though adjacent materials like books and supplies may only be covered if the costs are paid directly to the school.

• For both education credits, modified adjusted gross income must be under $90,000, or $180,000 if married filing jointly.