For most military families, a child can be claimed as a dependent starting in the year they were born.
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Tax Deductions for Military Children

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For military families, tax-filing season brings many questions regarding tax deduction opportunities. While specific forms and details can be found at IRS.gov or 800-TAX-FORM, the process of finding direct answers in the sea of information can be daunting. Below is a simple run-down of tax deduction opportunities for military servicemembers with children.

WHEN IS A DEPENDENT A TAX DEDUCTION?

For most military families, a child can be claimed as a dependent starting in the year they were born. The Child Tax Credit or the Additional Child Tax Credit may be claimed on your tax return for all children under 17 years of age. The details regarding child dependent tax credits can be found at IRS publication 972 Child Tax Credit. Qualifying expenses paid for adopting a child may be credited on your tax return under the Adoption Credit. This information can be found at Qualified Adoption Expenses, which is IRS form 8839.

CHILDCARE TAX DEDUCTIONS

If you pay for childcare that your military childcare benefits don't cover, you may be eligible for the Child and Dependent Care Credit. This tax credit provides support for parents who work or are looking for employment. For specific requirements, see Child and Dependent Care Expenses under the IRS Publication 503.

Earned Income Tax Credit (EITC) is another support tax credit for working families who earn wages from self-employment. EITC reduces the total taxes due as well as providing a tax refund, which makes it a great tax resource. For details, see IRS Publication 596.

As your children get older and pursue employment opportunities, they may be required to file their own income tax returns (IRS Publication 501 for qualifications). A child's investments may be taxed under the parent's tax rate. Specific requirements can be found at Tax Rules for Children and Dependents, IRS Publication 929.

TAX CREDITS FOR EDUCATION

Qualifying military have the opportunity to transfer GI Bill benefits, to your children and your spouse, at your discretion. This makes higher education for military children a less costly reality for those who qualify for the Post-9/11 GI Bill.

In addition, IRS tax credits for higher education are available to ease tuition costs. For example, The American Opportunity and the Lifetime Learning Credit can reduce your military family's federal income dollar-for-dollar, which reduces your total taxable income.

Many 529 tax-free education accounts grow tax free towards your child's future education. The Coverdell Education Savings Account can also provide a tax-free distribution for spending at a qualified educational institution. Although contributions are not tax deductible, the Coverdell Education Savings Account provides an additional level of support for educational spending.

If you are paying back a student loan, the loan interest may also be claimed as an adjustable income tax deduction; see IRS Publication 970.



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