Losing tax credits could mean a literal empty nest
Any parent will tell you children can be expensive. There are helpful tax breaks at different ages, but as your child moves into adulthood, those breaks change and eventually disappear. You may be able to offset those losses, but total failure to see the loss of those credits could result in a steeper tax bill you aren't prepared for. Below are the specific ages when credits disappear and what you might be able to do about it.
AGE 13: No more dependent day care credit
You know the max credit each year for the cost of daycare for your first child is $600. It's $1200 for two or more kids. No matter how many kids you have, the credit expires when they turn 13 years old.
What you can do:
If you don't want to leave your child at home alone just yet, consider hiring them to work at your business. They'll learn valuable lessons and a good work ethic in addition to owing little or no income tax on their wages.
AGE 17: Child Tax Credit no longer available
When you child reaches the age of 17, that $2000 you were getting each year as a Child Tax Credit, or CTC, will disappear. Tax credits are dollar-for-dollar reductions of taxes due, so as each child hits 17, your taxes will go up by the full amount of your previously claimed credit.
What you can do: Fortunately, there's still a different kind of credit you can claim. There is a $500 Credit for Other Dependents - someone who isn't a qualifying child for the CTC, like a high school senior or child in college.
AGE 19 OR 24: Moving out, moving on
When your child turns 19, they are no longer eligible for even the $500 Credit for Other Dependents, unless they are a student under the age of 24. Once they're past that age, no other credits are available. There are credits for qualified relatives, but there are more restrictions in place.
What you can do: A child in college makes you eligible to claim one of the higher education credits for qualified college expenses, such as the American Opportunity Tax Credit, which is $2500 per student per year. Be aware that credit is subject to being phased out.
As ever, it's important to keep us apprised of you situation. We are always up-to-date on the latest credits, changes to tax law, and may have other suggestions to help you. Before you take any financial action, talk it over with us.