So much changes when you become a parent.
You stop worrying about missing that trendy pop-up dinner, and start worrying about feedings and sleep schedules.
Your idea of entertainment changes from an exciting night out with friends, to a relaxing evening of Netflix and a (hopefully) sleeping baby.
And last – but certainly not least – your tax situation changes. Here’s a brief overview of how your taxes as a new parent will be different.
You’ll change your withholding
One of the first things to do once your child is born is to change your withholding. If you’re employed, you’ll have to fill out a new W-4 form for your employer, increasing your dependents.
If you’re self-employed, you’ll need to recalculate your estimated taxes for the year.
You’ll be claiming a new dependent
Adding your child to your tax return as a dependent will give you an immediate exemption, reducing your taxable income by $4,050 in 2017.
To claim your child, you’ll have to have their Social Security number. If you didn’t apply for a Social Security card for them at the same time you applied for a birth certificate, you can do so now. You’ll need to have proof of their age, identity, and citizenship, and file the correct form with the Social Security Administration.
You’ll get a tax credit
Depending on your income, you could receive a Child Tax Credit of up to $1,000 per child. The income threshold is different for each filing status, so using an online tax service like E-File can help you ensure you’re getting every cent of the tax credit you’re eligible for.
You can deduct childcare costs
If you work, earn taxable income, and pay for childcare to allow you do so, you can deduct your childcare expenses up to $3,000 for one child under age 13, and up to $6,000 for two children under age 13. The amount you receive will depend on the amount of your taxable income.
This deduction applies to more than just daycare providers, too. You can deduct what you paid a babysitter, nanny, summer camp provider, or other household staff (like a housekeeper) to care for your child, as long as that care was provided so that you could work. Sorry – date night babysitters won’t count come tax time!
Bottom line: You’ll likely see your overall tax bill reduced, although there are eligibility requirements for each credit and deduction
Having a child isn’t easy on your finances, which is why the IRS gives out these credits and deductions to parents. While your spending will undoubtedly rise after you have a child, your tax bill will often go down.
It’s important to remember that every credit and deduction you claim has eligibility requirements, so use a service like E-file to make sure you claim everything you can, and nothing you shouldn’t.