If you just became a parent last year, you may be unfamiliar with how this life change impacts your taxes. The filing process is significantly different after you have kids, and many new parents miss out on important tax breaks.
In this post, we examine a few key benefits you can receive when you file your tax return this year:
- Child tax credit: You can earn a credit of up to $1,000 per child, depending on your income. In order to claim this credit, you need to include your child’s Social Security Number (SSN). Be sure you to list your child’s name exactly as it appears on their SSN card. If you forgot to apply for an SSN card after having your baby, you can still apply for one now and file an extension on your taxes (using form 4868). Note that any taxes you owe before applying this tax credit will still be due by tax day.
- Dependent exemption: Once you have children, you can earn a $3,800 deduction—an amount of money that can be subtracted from your adjusted gross income—for each dependent you have.
- Childcare credit: If you’re sending your kids to childcare so that you and your spouse can work, you can qualify for a credit toward this expense—up to 35 percent of the total expenses, depending on your income. In order to claim this credit, you need to provide the tax ID number of the childcare provider (unless it is a tax-exempt organization). For nannies, you can either provide their tax ID number or SSN.
- Medical expense deduction: If you and your spouse have always been in relatively good health, you’ve probably never qualified for this exemption before. But having children comes with significant medical expenses, and if these expenses exceed 7.5 percent of your adjusted gross income, you can deduct them. It’s worth noting that besides the obvious medical costs—e.g., prenatal doctor appointments, hospital bills from childbirth—the costs of things like Lamaze classes or a breast pump can also be counted as medical expenses.
Whenever you have a change in life circumstances, it’s wise to consult with an experienced tax attorney to ensure you take advantage of all the benefits you deserve.