Kids Bring Joy, Chaos… and Tax Benefits: What to Know as a New Parent Filing a Return

Becoming a parent for the first time is a whirlwind. Between sleepless nights, endless diaper changes, and heart-melting moments, taxes are probably the last thing on your mind. But here’s some good news—while kids might cost a fortune in diapers and daycare, they can also bring valuable tax benefits that help ease the financial burden.

If you’re a new parent navigating your first tax season with a child, here’s what you need to know.

1. Your Child May Qualify as a Dependent

Let’s start with the basics. You can typically claim your child as a dependent if they lived with you for more than half the year and you provided more than half of their financial support. Claiming a dependent can open the door to multiple tax breaks and potentially reduce your overall tax bill.

Be sure to have their Social Security number handy—it’s required for your return.

2. The Child Tax Credit (CTC) Is a Game-Changer

One of the biggest perks for parents is the Child Tax Credit. For tax year 2024, eligible parents can claim up to $2,000 per qualifying child under the age of 17. Up to $1,600 of that amount can be refundable, which means you might get money back even if you don’t owe any taxes.

To qualify, your income needs to fall within certain limits. For example, the credit begins to phase out if your adjusted gross income is over $200,000 for single filers or $400,000 for joint filers.

3. Child and Dependent Care Credit

Childcare can be a huge expense, especially if you’re both working or attending school. Thankfully, the Child and Dependent Care Credit can help. You may be eligible to claim up to 35% of $3,000 in care expenses for one child (or up to $6,000 for two or more kids), depending on your income.

This credit can apply to daycare, babysitters, after-school programs, or even summer day camps—as long as the care provider isn’t a spouse or another dependent.

4. Earned Income Tax Credit (EITC)

If you’re a low- to moderate-income earner, having a child significantly boosts your chances of qualifying for the Earned Income Tax Credit (EITC)—one of the most valuable credits available.

The amount you can receive varies based on your income and the number of children you have. For example, in 2024, a family with one qualifying child can receive up to $3,995, while families with three or more children can receive up to $7,430.

5. Adoption Tax Credit

If you adopted your child, you may qualify for the Adoption Tax Credit, which helps offset the costs associated with adoption. For the 2024 tax year, the maximum credit is $15,950 per child, depending on your income and the amount of qualified adoption expenses.

6. Adjusting Your Withholding

Now that you have a dependent, it’s a good idea to review your withholding on your W-4 form. Claiming your child can reduce the amount of tax withheld from your paycheck, giving you a larger take-home income throughout the year.

7. Start Saving for Their Future

While it doesn’t impact your current tax return, setting up a 529 Plan to save for your child’s education can offer tax advantages down the road. Contributions aren’t deductible on your federal taxes, but earnings grow tax-free, and withdrawals for qualified education expenses are also tax-free.

Final Thoughts

Your new bundle of joy doesn’t just bring love and laughter—they also bring financial benefits when tax time rolls around. From credits to deductions, the IRS gives new parents a helping hand. But navigating the rules can be tricky, so consider using tax software or consulting a professional to ensure you’re getting every dollar you deserve.

Welcome to parenthood—and may your refund be as sweet as baby giggles.

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