Congratulations on becoming a parent! You may have heard there are many benefits to having a child from the unconditional love to tax deductions. Here is a quick guide to 5 things all new parents should know the 1st calendar tax year they have a child. As always any questions or if you need clarification, call our office!
#1 NEW SOCIAL SECURITY NUMBER
Usually this is handled when a child is first born at the hospital when you go through the paperwork. In order to claim your child on your tax return your child must have a social security number BEFORE you file.
#2 W-2 FILING STATUS
This only effects a single parent. As a new parent you may be able to claim ‘head of household.’ This filing status will entitle you to have a $8,950 tax deduction vs single filing status which is a deduction of $5,700.
#3 W-2 WITHOLDINGS
As a new parent you may want to consider adjusting your tax withholdings on you current W-2. As a new parent there are additional tax deductions you will be making which the amount you owe most likely less than expected. By consulting with your tax preparer you can get an idea of the ideal number to withhold with the potential to have more money in your pocket each month. As new parents with the added expenses – that extra money can come in handy!
#4 CLAIM A DEPENDENT
Your new baby is dependent on you for everything. On your tax return you may now claim your 1st dependent, or if you had multiples you would claim each child as a dependent. There are 3 possible benefits of claiming a dependent:
- Dependency Exemption: An automatic deduction of $3,900 decrease in taxable income
- Child Tax Credit: Up to $1,000 per child
- Earned Income Credit: This amount is calculated based on the household income and the # of dependents and can range from about $3,000 to about $5,600.
#5 CHILDCARE
If you are paying for your childcare while you are working you can deduct up to $3,000 with proper documentation from your center or caregiver which includes their Tax ID # or Social Security #.
We look forward to educating you on the new tax benefits of your child!
