Bringing home a new child is exciting, but it’s important for parents to remember their tax situation likely changes with the addition of a dependent family member. There are tax breaks specifically geared toward helping to alleviate some parenting expenses. These can result in a lower tax bill and a higher refund.
Before the next individual tax filing season rolls around, new parents should:
- Get the child a Social Security or Individual Tax Identification number
To claim parental tax breaks, you must have your child’s or dependent’s Social Security number, Adoption Tax Identification Number or Individual Tax Identification Number. If you give birth to your child in a hospital, one of the easiest ways to get a Social Security number for your child is to request one at the hospital when providing information for the birth certificate. Confirming a child’s birth is the only way the IRS can verify that you’re eligible for the credits and deductions you claim on your tax return.
- Check your withholding
A new family member might make you eligible for new credits and deductions, which can greatly change your tax liability. You can use the IRS Tax Withholding Estimator to check your withholding. You’ll need to provide your employer with an updated Form W-4, Employee’s Withholding Certificate, any time you want to change how much tax is withheld your paycheck. Click here to learn more about updating your withholding.
When preparing to file, check tax credits and deductions:
- Child Tax Credit
If you claim at least one child as your dependent on your tax return, you may be eligible for the Child Tax Credit. To check if a child qualifies for this credit, visit the IRS’ Does My Child/Dependent Qualify for the Child Tax Credit or the Credit for Other Dependents?
- Child and Dependent Care Credit
If you paid someone to help take care of your children or another member of your household while you work, you may qualify for the Child and Dependent Care Credit regardless of your income. If you paid for daycare expenses, specifically, you may be eligible to claim up to 35% of those expenses with certain limits.
- Adoption Tax Credit
This credit allows families who are in the adoption process during the tax-year claim eligible adoption expenses for each eligible child. You can apply the Adoption Tax Credit to international, domestic, private and public foster care adoptions.
- Earned Income Tax Credit
The Earned Income Tax Credit helps low- to moderate-income families get a tax break. If your family qualifies, you can use the credit to reduce the taxes you owe – and potentially increase your tax refund.
Corrigan Krause Can Help Individuals
Expanding your family can feel like an overwhelming amount of change all at once, but the experts at Corrigan Krause are ready to help guide your family into your next chapter – at least when it comes to your taxes. Click here to learn more about becoming a client.
