As lawmakers in Washington duke it out over revenues and expense cuts, parents who normally qualify for dependent related tax credits can only wait to see what lies ahead in 2013. As it stands today, the Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Credit and the American Opportunity Credit will all be reduced as of January 1, 2013.

A few details about these tax credits:

Child Tax Credit: max value $1,000 (currently) to $500.

Child and Dependent Care Tax Credit: $2,100 (max) to $1,440.

Earned Income Tax Credit: could decrease more than $600 for families with at least 3 children.

American Opportunity Tax Credit: $2,500 (max per year for 4 years; 40% refundable) would drop to $1,800 (for only 2 years, none of which would be a refundable credit).

“If this happens, many families will be worse off by hundreds, or even thousands, of dollars,” according to Roberton Williams of the Tax Policy Center.

For more details see CNN Money article “ Parents Await Fate of Four Key Tax Breaks .”

As always, we will be following these issues closely as the debate progresses.

Stephen Osborne
Accountant
sosborne@mo-cpa.com