Starting the new year as a new parent? No worries. There might be some insecurities related to your becoming a new parent and you might even wonder what this has to do with taxes.
We understand how challenging it is to cope with a new bundle of joy but this should not be a reason for you not to pay attention to some interesting basic tax hacks available to new parents like you.
Claim Your Child as Your Dependent
That’s right! Your child can help you cut down your taxes once you claim him/her as your dependent. Just be sure you have your Social Security Number for your child before you can do so. The hospital where you delivered your baby should have sent already the required information to the Social Security Office. If not, you can do it yourself by filling up the application form from the Social Security Administration and send or take it yourself to your local SSA office. Be sure to claim your child as dependent first before you can avail of the other tax benefits available to new parents like you.
Avail of the Tax Credits for Your Children
Your child is a real blessing, literally, when it comes to your tax dues. As your child enters the scene, you can now avail of two tax credits: the Earned Income Credit (EIC) and the Child Tax Credit (CTC). As a parent, having a child means you get higher EIC and also the credit value. That means you get more money from your work, you can still qualify for the credit, and you actually get more money from it.
The Child Tax Credit gives up to $1000 for every qualified child dependent. Although the credit is limited to the value of your tax due, it also means you are eligible to have the refund which is known as the Additional Child Tax Credit. Both EIC and CTC have income limitations, meaning not all can claim the credit, depending on your wage earnings. You can avail of both these credits, meaning you can have more cash to spend on your little one’s needs.
Take Advantage of the Child and Dependent Care Credits
While you work, you want to make sure your child is well-taken care for. The Child and Dependent Care Credit is the next tax benefit you can take advantage of as a new parent. Especially if you are a working parent, you get a maximum of $3000 credit for one dependent and $6000 for two or more. As your income increases, the credit might be reduced. The credit is also waived when your employer pays for the dependent care expenses or you might get maximum credit up to the amount your employer pays on your behalf. Whatever situation fits you, this credit is still a good source of additional tax benefits you might want to consider and look into.
Be kind to yourself as you try to take the first, challenging steps of parenting. You will surely get through with it and your tax expert advisers are always ready to provide assistance and additional information as needed.