Your new bundle of joy is going to bring quite a bit of changes to your life. Aside from the lack of sleep and "baby on board" signs on your new minivan, there are other changes coming too—changes in the form of your taxes. Your new baby is going to come with tax deductions and exemptions you should be aware of. Before filing your taxes though, you're going to need a social security number, which should be sent to you in the mail after your child's birth certificate is filled out at the hospital. See below for a list of these exemptions.
Child Tax Credit
The child tax credit gives you a deduction of $1,000 per child. It doesn't matter when in the year you had your child, you get the full exemption. This is also a deduction that you get to claim year after year, until your child turns 17.
Dependent Exemption
You can claim your child as a dependent, which will reduce your taxable income by $4,000. Again, it doesn't matter when in the year you had your child, you can still claim this exemption and get the full amount. The catch is that this exemption phases out beginning at income levels of $258,250 and $309,900 when married filing jointly according to the Internal Revenue Service.
Head Of Household
If you had a child and are single, you may be able to file for head of household. You must pay out more than half of the cost for providing the home for your qualifying dependent. You cannot claim this if you are married.
Withholding Adjustments
You can change your withholding on your W-4 form to claim dependents. This will increase your take home pay, but will decrease the amount of your tax refund. Think of it as a way of getting your tax refund throughout the year, rather than a lump sum check later down the road.
Childcare Credit
If you have your child in daycare to allow you to work, you can claim the cost and get some of it back. See the IRS form 2241 for further instructions to see if you can claim this credit, as there are some limitations.
Medical Expense Deduction
Having a baby is expensive. Be sure to keep all of your receipts from your medical expenses, as you may also qualify for a medical expense deduction depending on how much you spent out of pocket.
Talk to your tax accountant about other exemptions you may qualify for. If you are looking for more money on your weekly paycheck to pay for things like diapers and formula, ask about how you can change your withholding to get you more money. For help planning for taxes, visit Karla Dennis and Associates.
Share17 December 2015
Accounting is the absolute most important element of running a business. If you mess up the bookkeeping even the slightest bit, the entire business could be in trouble. I know how costly a small bookkeeping error can be. About three years ago, I made a seemingly small mistake in the financial records for my business and the next year when I filed my taxes, things were very bad for me. What would have required a small tax payment had suddenly turned into a big tax bill and quite a headache. Since then, I have worked with an accountant and things have been better.