Your newborn bundle of joy is also a tax deduction, but just how much of a deduction or tax credit you'll receive depends on whether she was born before midnight on Dec. 31, 2017, or after 12:01 a.m. on Jan. 1, 2018. That one-minute difference changes how much you get back in taxes for a newborn because Jan. 1 is the date the new tax law went into effect.
Understanding the Tax Benefits of a Newborn
How much you get back in taxes for a newborn depends on your income, and as noted, whether your baby was born in 2017 or 2018. Of course, even those born in 2017 will only qualify for the credits and deductions available in the year of their birth. After that, they are subject to the new tax legislation passed in late 2017.
Qualifying Child Rules
In order to be eligible for federal tax credits or deductions, a newborn must meet certain criteria laid out by the IRS. That means the child does not have to be your biological or adopted child, but must be related to you. Stepchildren, grandchildren, siblings and half-siblings, nieces, nephews and step-siblings or their descendants are considered qualifying children if they lived with you for more than half of the year and did not provide their own support. There are other considerations for qualifying children, but these do not apply to newborns.
If tragedy struck and your newborn died shortly after birth, the IRS still allows you to claim the child on your taxes as long as there is a hospital record of a live birth. While qualifying children must usually have a Social Security number, in the case of a deceased baby you should enter “died” on the 2017 Form 1040, line 6c, column 2. Attach either the record of live birth or the child’s birth certification to your income tax return.
Newborn Tax Credits 2018
The Tax Cuts and Jobs Acts, signed into law on Dec. 22, 2017, overhauled the U.S. tax code. It eliminated personal and dependent exemptions, but raised the standard deduction to $12,000 for single filers and $24,000 for married couples filing jointly. For new parents, the biggest change involves the child tax credit. The amount has doubled to $2,000 per child, but the new law phases the credit out at a much higher level than in the past. Until the law expires in 2025, single parents with an adjusted gross income of up to $200,000 and married couples filing jointly with an adjusted gross income of $400,000 may qualify for the child tax credit. The child must be claimed as a dependent on a parent’s tax return and must be a U.S. citizen, U.S. national or resident alien.
Some parents may qualify for the additional child tax credit, a refundable credit available for those parents whose child tax credit is greater than the amount of income taxes owed. Parents qualifying for the additional child tax credit must have earned income of at least $3,000 and a tax rate lower than 15 percent.
Newborn Tax Exemptions and Credits 2017
In 2017, parents may take a dependent exemption for their newborn on their tax return, worth $4,050. The child tax credit is worth $1,000 per child, but is available only to married couples filing jointly whose income does not exceed $110,000. For single filers, income cannot exceed $75,000.
- IRS: Qualifying Child Rules 1
- Business Insider: Having a Baby Can Give You Big Tax Breaks
- eFile: The Child Tax Credit
- eFile: Tax Exemptions for 2017 and Earlier Tax Returns
- eFile: How to Claim a Qualifying Child as a Dependent for Tax Deductions
- IRS: Child Tax Credit and Credit for Other Dependents at a Glance
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Financial Advisor, Sapling, nj.com and The Nest.