New parents may qualify for more tax credits, deductions
If you recently had or adopted your first child, filing your taxes probably is not a top priority. But even if you’re sleep-deprived and haven’t left your home in months, you still have to prepare a return.
With a new child, your taxes will get more complicated. But the flip side is you may qualify for a slew of new tax credits and deductions.
Generally, people think having a child will automatically lower their tax bill or trigger a larger refund. In many cases, it depends on your income. Lower-income parents are generally eligible for more generous credits and deductions, said Jim Daniels, a CPA and managing director at UHY Advisors, a tax and consulting services firm.
Child’s Social Security number
The first order of business is to make sure your child has a Social Security number, said John Karls, a tax partner at Armanino, a national tax advisory firm: “You can’t claim your child as a dependent on your tax return if they don’t have a Social Security number.”
If you don’t already have one for your child, apply now. It could take a while for the Social Security Administration to verify your child’s birth certificate and identity, so Karls recommends filing for a six-month tax extension while you wait.
Speaking of dependents, if you have an employer, fill out a new W-4 form to reflect that you now have a dependent.
Head of household’ status
If you’re a single parent, for tax purposes you’re considered the head of the household. That means you’ll be able to claim a $20,800 standard deduction, versus a $13,850 standard deduction for single filers without dependents. There are also separate, more favorable tax brackets for heads of households.
Note that the IRS won’t automatically recognize that you’re a single parent and thereby qualify for head-of-household status. You’ll have to manually check a box yourself or inform your tax preparer.
If you’re married and cover more than half of your child’s expenses, you would also be considered a head of household – but only if you file separately from your spouse.
Some key tax credits
You might qualify for the Child Tax Credit if you have an adjusted gross income of less than $200,000 or less than $400,000 if you’re filing a joint return with a spouse.
If you are employed and pay for child care, you may qualify for the Child and Dependent Care Tax Credit. You can seek the credit for up to $3,000 of expenses for one child, $6,000 for two or more children. The actual credit is a percentage of those expenses.
Having a child could make you eligible for the Earned Income Tax Credit. If you have one child and your adjusted gross income was $46,560 (filing alone) or $53,120 (filing jointly with a spouse), you could claim up to $3,995 in a refundable tax credit.
If you became a parent by adoption, you might qualify for an adoption tax credit of up to $15,950 in adoption-related expenses per child. This could include attorney fees, agency fees, traveling expenses and more.