A Few Tax Tips for New Parents
When it comes down to it, kids can be expensive. This is as true for those who are just bringing home a new baby from the hospital as for parents who adopt or for those who are raising a relative’s child. Fortunately, there are a lot of tax breaks available to parents, guardians, and caregivers of all types. Read on to learn more about these tax benefits and how they could apply to your own tax situation.
Social Security Number
One important step for new parents is to get their child a Social Security Number (SSN) or Individual Tax Identification Number (ITIN). These numbers will allow the IRS to confirm a child’s birth and verify that the parent is eligible for any deductions and credits being claimed on his or her yearly tax return.
Check Tax Withholding
It’s also for taxpayers to check their withholding after welcoming a new child into the family. Children could make a taxpayer eligible for new credits and deductions, which can in turn, change tax liability. To change how much tax is withheld from a paycheck, taxpayers should submit an updated Form W-4 to their employer.
Check Eligibility for Credits and Deductions
As we mentioned previously, there are certain credits and deductions that are only available to those with children. Some new parents, for instance, could qualify for the Child Tax Credit if they claim that child as a dependent. Taxpayers who pay someone else to help care for their children while they work could also qualify for the Child and Dependent Care Credit. This is true regardless of the taxpayer’s income. For instance, parents who pay for daycare could be permitted to claim up to 35 percent of those costs towards this credit. Finally, parents who recently adopted a child can claim the Adoption Tax Credit, which helps families who are engaged in the adoption process claim eligible expenses for each child. These credits can be applied not only to domestic adoptions, but also to international, private, and public foster care adoptions.
There are also credits available to taxpayers with dependents who don’t qualify for the Child Tax Credit. The maximum amount of this credit is $500 for:
- Dependents of any age who have a SSN or ITIN;
- Dependent parents or other qualifying relatives; or
- Dependents who are not related to the taxpayer.
For help determining which of these credits your family might qualify for, please reach out to our experienced legal team today.
Schedule a One-on-One Consultation
Welcoming a new family member into your home can be a wonderful experience. There are, however, also important tax implications that go along with these kinds of major life changes. To speak with a CPA, former FBI Special Agent, and experienced Florida tax & IRS attorney about how becoming a parent will affect your tax situation, call 386-490-9949 and set up a one-on-one meeting with Ronald Cutler, P.A. today. You can also reach a member of our legal team by completing one of our brief online contact forms.