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We all know that raising kids is expensive. Fortunately, Uncle Sam is rather family friendly and allows numerous child-related tax breaks. Here are three you won't want to miss:
1. Child and Dependent Care Credit
Parents with little ones in day care rarely miss out on this credit. It's worth 20% to 35% of child care expenses up to $3,000 for one kid and $6,000 for two or more children. But once a child hits school, some moms and dads wrongly assume that they can no longer claim this tax break. What they don't realize is that the IRS considers summer camp a qualifying expense for youngsters under 13, says Bob Meighan, vice president with tax prep software company TurboTax. The one caveat is that both parents need to be working, looking for work, or studying. (Disabled parents also qualify.)
Click here for more rules on how to claim the child and dependent care credit.
2. College Savings Plan Deduction
Let's say your mother gave you some money to put towards your child's future college expenses. You then make a contribution (in your own name) into a 529 college savings account. You chose this savings vehicle because you can withdraw the funds free of federal income taxes provided the cash is used for qualifying educational expenses.
Some parents, however, may not realize that these accounts come with another perk. A number of states also allow you to deduct your contributions. In New York, for example, residents can write off $5,000 for single filers and $10,000 for married joint filers. To see if you qualify, check out Savingforcollege.com.
3. Adoption Credit
If you adopted a child last year than you know the process is a long and costly one. While Uncle Sam can't compensate you for your time, the IRS can help you recoup some of your agency, attorney and travel fees.
The government allows parents of a newly adopted child a tax credit worth up to $12,150. (The credit is phased out if your modified adjusted gross income is between $182,180 and $222,180.) The tax rules can be a bit tricky with this one so you'll want to ask an accountant for more information. In the meantime, you can check out this IRS publication for additional details.
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