Tax Tips For New Parents
Becoming a parent for the first time can be physically and emotionally overwhelming, so it should come as no surprise that many new parents forget about, or are not aware of, the tax implications that are associated with adding a new member to your family. As a first-time parent, you have enough on your plate, so we’ve included a few things to think about come tax season. To learn more, please reach out to an experienced Florida tax & IRS attorney today.
Add Your Child as a Dependent
When reviewing their personal information on their tax returns, it is important for new parents to remember to claim their new child as a dependent, as this is a necessary step when it comes to qualifying for additional credits and deductions.
Claiming New Credits and Deductions
Parents automatically qualify for certain types of credits and deductions, including:
- The partially refundable Child Tax Credit of $2,000, which can be used to reduce what a taxpayer owes or can be added to a tax refund;
- The Earned Income Tax Credit, which assists lower to middle-class income families by reducing tax debt and increasing refunds;
- The Child and Dependent Care Credit, which is available to many parents who pay for child care, although the amount of the credit will depend on the number and age of the children being cared for; and
- The Adoption Credit, which can help offset the costs of adopting a child and for 2021, could be worth more than $14,000.
For help determining whether you and your family could qualify for some, or all of these child-related credits and deductions, please reach out to our legal team today.
Update Your W-4 Withholdings
Besides taking advantage of federal tax credits and deductions and claiming a new child as a dependent, first-time parents should also remember to address their withholdings by filing a new Form W-4 with their employer. This is an important step because withholding amounts often change upon the birth or adoption of a child.
Update Your Filing Status
Certain first-time parents may also be eligible for a change of filing status when submitting their tax return. Unmarried individuals, for example, could qualify as a head of household for tax purposes upon the adoption or birth of a child. By updating their status, new parents are often able to qualify for a more significant standard deduction.
Start Saving for College
Parents can start saving for their child’s tuition and related fees as soon as they are born or adopted. Further, many new parents are able to do so tax-free by opening a 529 Savings Plan. Contributions to these kinds of accounts are not deductible, but earnings will also be tax free, as will any payouts.
Speak with an Experienced Tax & IRS Attorney
Please call dedicated tax & IRS lawyer, CPA, and Former Special Agent FBI, Ronald Cutler at Ronald Cutler, P.A. at 386-490-9949 today. Initial consultations are conducted on a one-on-one basis and are free of charge, so don’t hesitate to call or contact us online today.