3 Cool Tax Credits for Your Children

Many people understand that there are a number of tax credits available. Some of these credits are available just for you having children and providing for their care. A tax credit is desirable because it directly lowers the amount you owe in taxes. Credits are applied -- just like gift cards -- to your tax total after everything is figured. If you have enough credits, you get money back! Here are three cool tax credits you might be eligible for, thanks to your children:

1. $1,000 Child Tax Credit: This tax credit is available to you if you have a child under the age of 17 for a full year. If you are married and filing jointly, though, the credit starts to phase out when your adjusted gross income hits $110,000 (if you are a single parent, the phase out begins at $75,000). For every $1,000 over the AGI limit, you lose $50 of credit until it's gone.

2. Dependent Care Credit: Do you pay for child care? Whether it's day care or a nanny, you can deduct 20 percent of what you spend on child care, up to $3,000 for one child and up to $6,000 if you have two or more children. You can even count preschool and private kindergarten costs in this amount. However, you should note that private day school starting at first grade is not eligible for the dependent care credit.

3. Adoption Credit: There is a dollar-for-dollar $12,150 credit available when you adopt. You can even count expenses you paid in a prior year, and carry forward some of your adoption costs. For the most part, you only get a credit for expenses that you pay. If you adopt a child with special needs, though, you can actually take the entire $12,150 credit, even if you didn't spend that much. The phase-out for the adoption credit starts for couples that make $222,180 AGI.