Tax Aversion Therapies · for families with children
Diagnosis: two or more dependents, one or two incomes, and a tax return that gets more complicated every September.
Prognosis: good.
There is no cure for income tax. These are the therapies.
Welcome. We’re glad to serve you.
Raising children is the most-subsidized activity in the tax code. A family with two children under 17 and $90,000 of income can see its federal tax fall by $4,400 for the credit alone, more with the dependent care credit, and to zero with the earned income credit at lower incomes. The subsidies are also the most-conditioned: each has an income limit, an age limit, a residency test, or a paperwork requirement, and families lose them by missing the condition rather than by being ineligible.
Below are the ten that matter most for a Colorado family in 2026, each with the dose (the 2026 figure), what it requires, and where the full article is. The contraindications at the end are for the preparers: the phase-outs and interactions where one therapy reduces another.
Dose: $2,200 per qualifying child under 17 at year end, $1,700 of it refundable; $500 for each other dependent. Phases out above $200,000 single / $400,000 joint.
The credit requires the child to have a Social Security number issued before the return’s due date, to have lived with you more than half the year, and to be claimed by one parent only. For divorced or separated parents, the custodial parent claims it unless Form 8332 releases it; our divorce page explains what the release does and doesn’t transfer. For children born 2025 through 2028, the Treasury deposits $1,000 into a Trump account opened for the child; the parent elects it on Form 4547 with the return, and the account accepts up to $5,000 a year of family contributions after that. Full article: The Child Tax Credit and the New Trump Accounts.
↑ Back to topDose: credit of 20% to 50% of up to $3,000 (one child) or $6,000 (two or more) of care costs for children under 13, the top rate at lower incomes; or up to $7,500 a year through an employer FSA, excluded from income and FICA.
Summer day camp counts (overnight camp doesn’t). Preschool counts; kindergarten and up doesn’t, but before- and after-school care does. The care must let you work or look for work, and you need the provider’s name, address and tax ID. A couple in the 22% bracket usually does better with the $7,500 FSA than the credit; a lower-income family with a 50% credit rate does better with the credit. We run both. Full article: Summer Day Camp Counts.
↑ Back to topDose: $24,150 standard deduction instead of $16,100, and the 12% bracket runs to $67,450 instead of $50,400; typically $1,000 to $1,500 a year.
Unmarried (or living apart from a spouse for the last six months of the year), paying more than half the cost of the home, with a child living with you more than half the year. The child need not be your dependent; a parent who released the child to the other parent with Form 8332 still files head of household. Full article: Head of Household.
↑ Back to topDose: for 2026, up to $4,427 with one child, $7,316 with two, $8,231 with three or more; fully refundable; available to joint filers with earned income up to about $68,000 with three children.
Families assume it is for the very poor. A married couple with three children and $55,000 of wages gets several thousand dollars. A year with a layoff, a leave, or a new business that lost money can bring a family that never qualified into range. Investment income over $12,200 disqualifies. Colorado adds a state credit equal to a percentage of the federal one. Full article: The Earned Income Tax Credit.
↑ Back to topDose: a Colorado child tax credit for children under 6 at lower incomes, and a child care credit of 50%, 30% or 10% of the federal credit at AGI up to $25,000 / $35,000 / $60,000; plus the Colorado EITC at a percentage of the federal.
These follow the federal claim: whoever claims the child federally claims the Colorado credit. They are refundable. The Colorado child tax credit was expanded for 2024 forward with an income-tiered schedule for young children (verify 2026 tiers). Full article: Colorado Income Tax: The Highlights.
↑ Back to topDose: a child under 18 employed by a parent’s sole proprietorship (or a partnership of the parents only) owes no Social Security or Medicare tax, and no federal unemployment tax under 21; the first $16,100 of wages is covered by the child’s standard deduction; and the wages are earned income that can fund a Roth IRA up to $7,500.
The work has to be real, the pay reasonable for the work, and the payroll run like any other (W-2, timesheets). It does not work through an S corporation or a corporation (FICA applies), though the deduction still does. A 15-year-old who earns $8,000 doing the business’s social media, scanning, or shop work moves $8,000 from the parent’s 24% bracket to the child’s 0%, and a Roth funded at 15 has fifty years to grow. Full article: The Kiddie Tax and Household Employees covers the family-employment rules.
↑ Back to topDose: a child’s first $1,350 of unearned income is tax-free, the next $1,350 taxed at the child’s rate, and everything above $2,700 at the parents’ rate, through age 17 (or 23 for a full-time student who doesn’t provide half their own support).
The planning is in the gap: a gift of appreciated stock to a child who sells it uses the child’s $1,350 at 0% and the next $1,350 at the child’s 0% capital-gains rate before the parents’ rate applies. Above the line, growth investments that don’t pay income (and a 529, which never does) beat income-producing accounts in a child’s name. A child with earned income is taxed at their own rate on that part regardless. Full article: The Kiddie Tax.
↑ Back to topDose: tax-free growth and tax-free withdrawals for tuition, fees, books, room and board, up to $10,000 a year of K–12 tuition (raised under the 2025 act (verify new K-12 limit and expanded expenses)), apprenticeships, and $10,000 lifetime of student loans; plus a Colorado subtraction for contributions to a Colorado plan, capped per taxpayer per beneficiary (verify 2026 cap).
Colorado is one of the states that gives a deduction for its own plan, so a Colorado family should use CollegeInvest even if another state’s plan has lower fees. Grandparents can contribute and take the subtraction too. Leftover funds can move to a Roth IRA for the beneficiary, up to $35,000 lifetime, after 15 years. Full article: Education Beyond the Credits.
↑ Back to topDose: up to $17,670 per child of qualified adoption expenses in 2026 (verify), with up to $5,000 refundable under the 2025 act; the full amount for a special-needs adoption regardless of expenses; phases out above about $259,000 of MAGI.
Employer adoption assistance of the same amount is excludable from income on top of the credit (not for the same dollars). Expenses for a domestic adoption can be claimed the year after they are paid even if the adoption isn’t final; foreign adoptions wait until final. Full article: covered in the phase-outs page.
↑ Back to topDose: no refund and no balance; $2,200 per child in Step 3 on one spouse’s W-4; the Step 2(c) box checked on both when both work.
Not a tax saving, but the most common April problem for two-earner families with children is both spouses listing the kids on their W-4s, which takes the credit off twice during the year and produces a balance due. The fix is ten minutes. Full article: Your W-4 and Withholding.
↑ Back to topYes. The $2,200 credit per child under 17 phases out above $400,000 for a married couple ($200,000 single), so at $180,000 you get all of it. The dependent care credit is also available at any income, at the 20% rate.
If you are a sole proprietor and the work is real, yes: no Social Security or Medicare tax on the wages, no tax to the child up to $16,100, a deduction to you, and the wages let the child fund a Roth IRA. Keep timesheets and run it through payroll.
You lose the $2,200 child tax credit in those years, if you signed Form 8332. You keep head of household status, the earned income credit, and the dependent care credit every year if your son lives with you more than half the year; those don’t transfer.
Usually, because Colorado gives a state subtraction for contributions to its own plan, which most states don’t. Growth is tax-free, K–12 tuition and apprenticeships qualify, and leftover funds can move to a Roth IRA for the child.
For the Tax Shop desk · the phase-outs, cliffs and interactions that change the dose
Bring the children’s Social Security cards, the day-care provider’s tax ID, the 529 statements, and both spouses’ pay stubs. Most of the therapies above are claimed on the return we already prepare; the ones that need a decision before year end are the FSA election at open enrollment, the child’s payroll, and the gift of appreciated stock. Those are a December phone call.
Call 303-734-1040 or stop by the office in Lone Tree. We’ve been reading the footnotes for Douglas County and the Denver area since 1969.
Figures reflect the 2026 tax year as currently published and are rounded for readability. Items marked (verify) are to be confirmed against IRS or Colorado DOR sources before the figures freeze in December. Last updated October 15, 2026.
