Federal And Wisconsin Tax Deductions and Credits for Parents
What federal and Wisconsin deductions and credits can I claim for a dependent? Here are some of the most common federal and Wisconsin tax deductions and credits for dependent children.
Federal Credit for Adoption Expenses
A federal tax credit is available for qualified adoption expenses incurred when adopting an eligible child. In addition, an income exclusion is available for adoption assistance provided by employers. Both the credit and exclusion cover qualified adoption expenses as defined in section 23(d)(1) of the Code. These expenses include reasonable and necessary adoption fees, court costs, attorney fees, travel costs (including expenses for meals and lodging while traveling), and other costs directly associated with the legal adoption of an eligible child. The tax credit is nonrefundable, meaning it’s limited to your tax liability for the current year. However, any excess credit beyond your tax liability can be carried forward for up to five years.
To claim the adoption credit or exclusion, complete federal Form 8839, Qualified Adoption Expenses. Access Form 8839 here.
Federal Child Tax Credit
The Child Tax Credit may be claimed for each qualifying child with a valid Social Security number. In general, to be a qualifying child, the individual generally must:
- Have been a U.S. citizen, U.S. national or U.S. resident alien;
- Be properly claimed as your dependent on your tax return;
- Be under age 17 at the end of the year;
- Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece or nephew);
- Provide no more than half of their own financial support during the tax year;
- Have lived with you for more than half the year; and
- Not filed a joint return with their spouse for the tax year or filed it only to claim a refund of withheld income tax or estimated tax paid.
You qualify for the full amount of the Child Tax Credit for each qualifying child if you meet all eligibility factors and your annual income is not more than the annual threshold depending on filing status.
*Parents and guardians with higher incomes may be eligible to claim a partial credit.
*Special consideration applies for children of divorced parents.
To claim the credit, complete federal Form 8812, Credits for Qualifying Children and Other Dependents. Access Form 8812 here.
Federal Credit for Child and Dependent Care Expenses
The Federal Credit for Child and Dependent Care Expenses is a tax credit available to working parents and caregivers who incur expenses related to the care of their qualifying dependents, such as children under the age of 13 or individuals with disabilities who require assistance and supervision. To qualify for this credit, the expenses incurred must be for the well-being and safety of the dependent while the taxpayer is engaged in work-related activities. The tax credit is nonrefundable, meaning it’s limited to your tax liability for the current year.
To claim the credit, taxpayers are required to complete federal Form 2441. Access Form 2441 here.
*Special consideration applies for children of divorced parents.
Federal Tax Credits and Deductions Relating to Education
Federal tax credits and deductions relating to education offer financial benefits to eligible students and their families to help offset the costs of higher education. Learn more about education related tax credits and deductions here.
Federal Earned Income Credit
The Federal Earned Income Credit (EIC) is a special tax benefit for certain working individuals and families with at least one qualifying child. Generally, to claim the credit, a taxpayer must have worked and earned income under the annual threshold, have investment income under the annual threshold, be a U.S. citizen or resident alien for the entire year, and have a qualifying child. In certain cases, the EIC may be claimed by individuals without a qualifying child.
To claim the credit, taxpayers are required to complete federal Schedule EIC. Access Schedule EIC here.
Wisconsin Personal Exemption (Deduction)
Additional Wisconsin exemptions are allowed equal to the number of dependents you claim on the federal Form 1040 or 1040-SR. Enter an additional exemption for each dependent filled in on federal Form 1040 or 1040-SR. This deduction is claimed on Wisconsin Form 1.
Wisconsin Credit for Child and Dependent Care Expenses
The Wisconsin Child and Dependent Care Tax Credit is a new credit available to taxpayers claiming the federal child and dependent care tax credit. As a result, the child and dependent care expense subtraction is no longer available. If you claimed the federal child and dependent care tax credit on your federal return, you may claim the additional child and dependent care tax credit. To claim the Wisconsin tax credit, you or your spouse must have been a legal resident of Wisconsin for the entire year. This nonrefundable credit is claimed on Wisconsin Form 1, along with federal Form 2441.
Wisconsin Earned Income Credit
The Wisconsin Earned Income Credit (EIC) is a special tax benefit for certain working individuals and families with at least one qualifying child. The earned income credit is refundable. To see if you qualify for the Wisconsin Earned Income Credit, visit the Wisconsin Department of Revenue website.
.
Wisconsin Tax Deductions and Credits Relating to Education
Wisconsin Tax Deductions and Credits for Education offer financial relief to state residents pursuing higher education. Learn more about Wisconsin education deductions and credits here.