Top 5 Tax Strategies for Millennial Parents to Save More Money

Want to keep more of your hard-earned money? As a busy parent, you’re juggling work, kids, and everything in between—but what if you could also cut your tax bill and put more money back into your pocket?

These tips will help you save for your future, take advantage of tax breaks, and make the most of every dollar.

1. Claim the Child Tax Credit

If you have kids under 17, you could be eligible for up to $2,000 per child in tax credits. And here’s the best part—this isn’t just a deduction. It’s a credit, meaning it directly reduces your tax bill dollar for dollar.

But there’s a catch—income limits. If your adjusted gross income (AGI) is above $200,000 for single filers or $400,000 for married couples, the credit starts to phase out.

Tax-saving tip: If you’re near the income threshold, consider strategies to lower your AGI, such as maximizing 401(k) contributions, contributing to a Health Savings Account (HSA), or strategically timing charitable donations.

2. Use a Dependent Care Flexible Spending Account (FSA)

If you’re paying for daycare, after-school programs, or summer camps, a Dependent Care FSA is a fantastic tax-saving tool.

With a Dependent Care FSA, you can set aside up to $5,000 per year pre-tax to cover these expenses. This lowers your taxable income and helps you manage child care costs more efficiently.

Tax-saving tip: This is a ‘use it or lose it’ benefit, so make sure to plan accordingly and use all the funds within the designated time frame.

3. Start a 529 Plan for Education Savings

A 529 Plan is a tax-advantaged way to save for your child’s education. Whether for college, private school, or even student loan payments, these plans offer incredible tax benefits.

Your contributions grow tax-free.
Many states offer tax deductions or credits when you contribute.

Tax-saving tip: Start early. Even small, consistent contributions can add up significantly over time, thanks to compound growth.

4. Max Out Retirement Accounts to Lower Taxable Income

As parents, we often prioritize our children’s future—but don’t forget about your own. Contributing to a 401(k) or IRA not only secures your retirement but also comes with significant tax advantages.

Traditional 401(k) & IRA contributions reduce taxable income today.
Roth IRA contributions grow tax-free—ideal if you expect to be in a higher tax bracket later.
Self-employed? Solo 401(k)s and SEP IRAs offer even more savings.

Tax-saving tip: If your employer offers a 401(k) match, contribute enough to get the full match—it’s free money!

5. Deduct Student Loan Interest

Still paying off student loans? You may be eligible for the student loan interest deduction, allowing you to deduct up to $2,500 per year in interest payments.

But be aware of income limits:

Phase-out begins at $75,000 for single filers.
Completely phases out at $155,000 for married couples filing jointly.

Tax-saving tip: If you’re close to the income threshold, consider contributing more to your pre-tax retirement accounts to lower your AGI and maintain eligibility.

Work with a Tax Professional

Taxes can be overwhelming—especially for busy parents. That’s why working with a CPA or financial advisor can make all the difference. A professional can help you navigate tax law changes, find deductions you might be missing, and implement personalized strategies to optimize your tax situation.