Tax Deduction for a Baby

by W D Adkins

Luckily for your financial bottom line, babies come with a basket full of tax breaks that could save you thousands of dollars. Contact the Social Security Administration and apply for a Social Security number as soon as the baby is born. You can’t get any of the tax benefits without it.

A Dependent Baby

You must be able to claim a baby as a dependent to get tax deductions. Normally, the Internal Revenue Service says children have to live with you for at least 50 percent of the calendar year. However, a newborn counts as a dependent for the current year if she is born by year’s end. Suppose the baby is born on December 31, 2015. She’s a dependent for 2015. If she’s born on January 1, 2016, she can be claimed for 2016, but not for 2015.

Dependent Exemption

A baby entitles you to a dependent exemption. You can get this exemption every year until she is too old to be claimed as a dependent. The exemption was $4,000 as of 2015. This means you get to take that much off your gross income before figuring out how much you owe Uncle Sam.

Pregnancy and Childbirth Medical Deductions

A baby’s tax benefits can start even before she’s born. Doctor’s visits, medical supplies and prescribed medicines related to the pregnancy may be deductible. The IRS says the amount you spend for out-of-pocket pregnancy, childbirth and other medical costs, including health insurance premiums, must add up to more than 10 percent of your adjusted gross income. Deduct only the amount in excess of 10 percent of AGI.

More Tax Breaks: Credits

A baby may make you eligible for one or more tax credits. The Child Tax Credit can reduce your tax liability by up to $1,000 each year until a child is 16. You may be able to get a credit for paying someone to care for the baby while you and your spouse work or attend school. This Child and Dependent Care Credit can be as much as $1,050, depending on your income and child care costs. It applies from birth until a child turns 13. There’s also the Earned Income Tax Credit for low and middle-income parents. The amount is based on income and the number of children you claim. Children can qualify for the EITC as long as they can be claimed as dependent children.

Additional Qualifying Rules

Your baby will provide tax breaks from the time he is born until he grows up. You can claim him until the year he turns 19, or 24 if he stays in school full time. You must be the only person who claims a child as a dependent. For instance, if a married couple files separately, only one parent can claim the child. Except for foster children, a dependent child has to be related to you in some way. The child must also be a U.S. citizen, or a resident of the U.S., Mexico or Canada.

Photo Credits

  • MIXA next/MIXA/Getty Images