Raising a child is a major financial commitment. From child care and extracurricular activities to education and college, the expenses can add up quickly. In fact, a 2026 LendingTree analysis estimates that raising a child through age 18 costs an average of $303,418.
While tax planning can’t eliminate those costs, it can help families take advantage of available tax credits and tax-advantaged savings strategies. Here’s a look at some of the tax benefits parents should know about in 2026.
Tax Credits for Parents
Tax credits can be particularly valuable because they directly reduce your tax liability. Depending on your family’s circumstances, you may qualify for several credits.
Child Tax Credit
The Child Tax Credit (CTC) can provide up to $2,200 per qualifying child under age 17 for 2026. A portion of the credit—up to $1,700 per qualifying child—may be refundable for eligible taxpayers. Income limitations and other requirements apply.
Credit for Other Dependents
Once a child no longer qualifies for the Child Tax Credit, you may still be eligible for the Credit for Other Dependents. The credit may also apply to certain other qualifying dependents, such as an elderly parent. Income limitations apply.
Child and Dependent Care Credit
Child care can be one of the largest expenses families face during a child’s early years. If you pay for care so you can work, look for work or attend school, you may qualify for the Child and Dependent Care Credit.
For 2026, the maximum credit rate increased to 50% of qualifying expenses. Eligible expenses remain capped at $3,000 for one qualifying individual or $6,000 for two or more.
Adoption Tax Credit
Families who adopt may be eligible for a tax credit for certain qualified adoption expenses, including adoption agency fees, legal expenses and certain travel costs.
For 2026, the maximum adoption credit is $17,670, with up to $5,120 potentially refundable. Income limitations apply.
Don’t Overlook Education Tax Benefits
As children get older, education expenses become another major consideration. Two federal tax credits may help eligible families offset the cost of higher education: the American Opportunity Tax Credit and the Lifetime Learning Credit.
Families should also consider how education tax credits work alongside education savings accounts. Planning ahead can help you coordinate these benefits and avoid using the same expenses to claim multiple tax benefits.
Start Saving for College Early
A 529 plan can be an effective way to save for future education expenses. Contributions aren’t deductible for federal income tax purposes, but earnings can grow tax-free, and withdrawals generally aren’t taxable when used for qualified education expenses.
Recent changes have also expanded the ways 529 funds can be used. Beginning in 2026, the annual limit for certain qualified K–12 tuition expenses increased to $20,000.
Coverdell Education Savings Accounts (ESAs) are another option, although they have lower contribution limits and additional eligibility requirements. Depending on your family’s goals, a 529 plan, Coverdell ESA or combination of strategies may make sense.
What About Trump Accounts?
Section 530A accounts, commonly called “Trump Accounts,” are another new savings option for eligible children. Contributions can be made until the beneficiary turns 18, and annual contributions are generally limited to $5,000 during the growth period. Certain eligible children born between 2025 and 2028 may also qualify for a $1,000 government-funded pilot contribution.
These accounts are different from 529 plans and aren’t necessarily the best choice if your primary goal is paying for education. However, they may be worth considering as part of a broader long-term savings strategy.
Make Tax Planning Part of Your Family’s Financial Plan
The cost of raising a child can change significantly as your family moves from child care to extracurricular activities to college. Tax planning can help you make the most of the benefits available at each stage.
Rather than waiting until tax-filing season, consider reviewing your family’s situation throughout the year. Ask your tax advisor:
- Are you taking advantage of the tax credits available to your family?
- Are you saving for education in a tax-advantaged way?
- How should you coordinate education tax credits with 529 withdrawals?
- Could changes in your income affect your eligibility for certain benefits?
- Are there state tax benefits you should consider?
The tax rules surrounding dependents, education and family-related credits can be complex, and the right strategy depends on your individual circumstances. Proactive tax planning can help you identify opportunities before they become missed opportunities.
From diapers to a diploma, raising a child is a long-term financial commitment. With the right planning, you can make every available tax benefit work harder for your family.