Being a parent comes with so many wonderful rewards from the simple pleasure of watching your baby grow and develop, to meeting the wonderful community of like minded and supportive Moms who you never realized were on your doorstep. But among the many and varied gratifications, there’s a whole lot to learn. Some of it comes quite naturally, while a lot of it comes with months and months of repetition and persistence. With the often frantic life of a new Mom as busy as it is, it’s unlikely that you’ve given much thought to the tax implications of your little one, but as April 15th draws near, we thought this might be a pertinent time to address some of the questions you may have filing for your first year with an adorable little dependent. All Moms need to box clever with their finances and getting their tax affairs in order is a great start…
Can I claim my new baby on last year’s taxes?
This depends on how old your little one is. If he or she was born on December 2017 or any day before that then the good news is that they are classed as a dependent for the entire year. This is why it’s really important to keep your baby’s social security card in a safe place or at the very least make sure that you have easy access to their social security number (simply take a photo of it with your phone if all else fails).
Do I get tax benefit for having a kid?
You betcha! When your baby is born you now have a dependent which the state understands impacts upon your income, giving you a reduction on your taxable income of $4,050 per child. This can reduce the tax you pay per year by as much as $,1000 per child. Your child remains a dependent until they turn 19 at the end of the calendar year, live with you for more than 50% of the year, are financially supported by you (teens can have part time jobs so long as they don’t cover more than 50% of their living expenses) and aren’t claimed as a dependent on anyone else’s taxes.
Does having a kid increase my chances of an audit?
We all live in fear of an audit from the IRS and it’s always worth having a tax lawyer like Alexander Law Firm on speed dial just in case the IRS wants to take a closer look at your tax return or wants to raise a dispute. Fortunately, however, having a child is not one of the typical red flags that increases your chances of an audit.
What about President Trump’s new tax law?
Lots of parents have hears about Trump’s tax law and how it applies to them. The Tax Cuts and Jobs Act will double child tax credit to $2000 per year and increase the standard deduction to $12,000 for single parents and $24,000 for married couples. This will not, however, come into effect until the end of the 2018 tax year so it’s certainly something for parents and expectant parents to look forward to.