Tax Talk Thursday: Back-to-School Tax Tips for Parents

Back-to-school season isn’t just about backpacks, lunch boxes, and new schedules — it’s also a great time for parents to review their tax situation and make sure they’re getting every benefit available. At MKHS Tax Group, we help families understand more, stress less, and file with confidence, so let’s dive into what you should know before the school year is in full swing.

The American opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is one of the most valuable tax breaks for parents with students in their first four years of post-secondary education. This credit can be worth up to $2,500 per eligible student, and 40% (up to $1,000) is refundable even if you owe no tax. Graduate students or those beyond the first four years may still qualify for the Lifetime Learning Credit (LLC), which provides up to $2,000 per return with no limit on the number of years you can claim it. Both credits phase out at certain income levels, it’s important to know where you stand.

Dependent Care Benefits and Child & Dependent Care Credit

Child care costs don’t disappear just because kids are older — after-school programs, day camps, and babysitters can add up. If these expenses allow you to work or look for work, you might qualify for the Child and Dependent Care Credit, which can be worth up to 35% of $3,000 of expenses for one child or $6,000 for two or more. Many employers also offer a Dependent Care FSA, letting you pay up to $5,000 of care costs pre-tax. In 2026, the law increases the contribution limit for dependent care FSAs from $5,000 to $7,500. For many middle and higher-income families, the percentage of expenses you can claim under the credit will also become more generous.

Adjust Withholding for 2025/2026

The start of the school year is also a good time to review your IRS Form W-4. Parents who expect to claim education credits, dependent credits, or the Child Tax Credit may be over-withholding, which means smaller paychecks now and a bigger refund later. Adjusting your withholding early in the school year can improve your monthly cash flow.

The Child Tax Credit (CTC)

Parents should also be aware that the Child Tax Credit (CTC) remains $2,200 per qualifying child under age 17 for 2025, with up to $1,600 refundable. Phaseouts begin at $400,000 for joint filers and $200,000 for head-of-household filers. Knowing where your income falls relative to these thresholds can make a difference in planning year-end deductions. in 2026, the credit amount will be indexed for inflation, so expect slight increases in future years

Above-the-Line Deductions: Student Loan Interest & Educator Expenses

Don’t forget about deductions for student loan interest — up to $2,500 per year — or the educator expense deduction for teachers, now up to $300 per teacher for classroom supplies and professional development expenses.

State-Level Deductions

Finally, consider whether your state offers tax deductions for 529 plan contributions. In many states, you can contribute to a 529, take the deduction, and use the funds almost immediately to pay tuition. One big change in 2026 is that you’ll be able to withdraw up to $20,000 per year from a 529 plan for K-12 expenses (up from $10,000). Also, additional non-tuition qualified education expenses (like tutoring or online materials) are included.

Recordkeeping is Key

Keep detailed records for tuition, books, laptops, and even internet costs if they’re required for school — these may qualify as Qualified Education Expenses for credits or 529 distributions. Good documentation reduces audit risk if the IRS asks questions later.

By taking these steps early in the school year, you can maximize your tax savings, smooth your cash flow, and avoid stressful surprises at tax time. For personalized advice and planning, reach out to info@mkhstaxgroup.com — we’ll help you understand more, stress less, and file with confidence.